Question:
Suppose a competitive firm produces 100 units of X for a price of Rs.10 a unit. The firmis employing labour and capital such that the marginal physical product of labour and capital is 20 and 5 and the prices paid to labour and capital are Rs. 60 and Rs. 40 respectively. How would you characterize the firm
| A. |
the firm is in long-run equilibrium |
B. |
the firm is earning excess profits |
C. |
the firm should expand production |
D. |
the firm should contract production |
Answer» c. the firm should expand production |
| Note: |
The above multiple-choice question is for all general and Competitive Exams in India. |
