Suppose MPL = 0.5 (q/L) and MPK = 0.5 (q/K). In the long run, the firm will hire equal amounts of capital and labor
A) all of the time.
B) only when w = r.
C) only when w = 0.5 * r.
D) at no point in time.
Answer: only when w = r.
Suppose MPL = 0.5 (q/L) and MPK = 0.5 (q/K). In the long run, the firm will hire equal amounts of capital and labor
A) all of the time.
B) only when w = r.
C) only when w = 0.5 * r.
D) at no point in time.
Answer: only when w = r.