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A firm uses 80 hours of labor and 6 units of capital to produce​ 10,000 gadgets per day.​ Labor's marginal product is 4 gadgets per hour and the marginal product of capital is 20 gadgets per unit. Each unit of labor costs​ $8 per hour and each unit of capital costs​ $50 per unit. If the firm wants to continue producing​ 10,000 gadgets per day at the lowest possible​ cost, it should A. use less of both inputs. B. use more labor and less capital. C. use more capital and less labor. D. continue using 80 hours of labor and 6 units of capital.

Answer :

pedrocarratore

Answer:

B. use more labor and less capital

Explanation:

To find which method of production, hours of labor or units of capital, has the lowest marginal cost, simply divide the cost per unit by its corresponding marginal product.

For hours of labor:

[tex]\frac{\$8 }{4} =\$2 \ per\ gadget[/tex]

For units of capital:

tex]\frac{\$50 }{20} =\$2.5 \ per\ gadget[/tex]

Since labor has a lower cost per gadget than units of capital, in order to decrease cost, the company should use more labor and less capital.

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