Question

If input 1 is twice as productive as input 2, then the cost-minimizing input mix uses more input 1 than input 2. t f

Answer 1

When determining the cost minimizing combination of resources, we must first divide the marginal product of the factor input by the factor price. In the above example, the price of labor (L) is $10 per unit and the price of capital (K) is $20 per unit.