Suppose a firm uses labor and capital resources which are highly substitutable. At the current output level marginal product of labor is 15 units and marginal product of capital is 10 units. If unit price of labor is $15 and unit price of capital is $20. What do you recommend this firm to reach optimal combination of resources? Group of answer choices increase use of both labor and capital increase use of labor and decrease use of capital decrease use of both labor and capital decrease use of labor and increase use of capital
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In this case, MRTS = 15/10 = 1.5. Show more…
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