Which of the following statements is are TRUE assuming the f

Which of the following statements is (are) TRUE, assuming the firm is choosing the optimal bundle of inputs that minimizes the cost of producing a given quantity of output?

I. The marginal product per dollar spent on labor equals the marginal product per dollar spent on capital.

II. AP_L = AP_K

IV. MP_L × W = MP_K × R

Answer Options:

A.I and III

B.I, II, III, and IV

C.IV

D.I and II

Solution

D is correct

MPL/MPK= W/R

This can be written as MPL/W= MPK/R

which is same as equation given in II.

Also this is nothing but marginal product per dollar dollar spent on labor is equal to marginal product per dollar spent on capital.