If the price of a unit of output for a perfectly competitive firm ...

[Haya94]

Question 1

A firm is currently hiring capital and labor so that 
MP_L/
P_L < 
MP_K/
P_K, if the firm wishes to maximize profits it should hire

◦ less labor and less capital.
◦ more capital and more labor.
◦ more labor and less capital.
◦ less labor and more capital.

Question 2

If the price of a unit of output for a perfectly competitive firm is $5 and the profit-maximizing condition is met, then 
MP_L/
P_L = 
MP_K/
P_K = 
MP_A/
P_A will be equal to

◦ $5.
◦ $1.67.
◦ $0.20.
◦ $0.05.

[spencer.martell]

Answer 1

less labor and more capital.

Answer 2

$0.20.