Suppose a firm hires both labor (L) and capital (C) under purely competitive conditions. The price of labor is PL, and that of capital is PC. The marginal product of labor is MPL, and that of capital is MPC. The firm sells its product competitively at a price of PX. Which of the following must pertain if the firm is to minimize the cost of producing any output? a. may be maximizing profits, but it is not minimizing costs b. may be minimizing costs, but it is not maximizing profits. c. is neither minimizing costs nor maximizing profits. d. is minimizing costs and maximizing profits.

Question

Lia

Business

3 August, 03:20

Suppose a firm hires both labor (L) and capital (C) under purely competitive conditions. The price of labor is PL, and that of capital is PC. The marginal product of labor is MPL, and that of capital is MPC. The firm sells its product competitively at a price of PX. Which of the following must pertain if the firm is to minimize the cost of producing any output? a. may be maximizing profits, but it is not minimizing costs b. may be minimizing costs, but it is not maximizing profits. c. is neither minimizing costs nor maximizing profits. d. is minimizing costs and maximizing profits.

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Answers (1)

Know the Answer?

Grayson Mcconnell · Answer 1

The correct answer is C. is neither minimizing costs nor maximizing profits

Explanation:

A company that operates under the conditions described above, moves within a market in purely competitive conditions that ensures linear behavior of demand and supply, which is why it must establish the condition of minimizing costs so that the market does not harm, this means that in the purely competitive market you should not minimize costs or maximize established profits.