A firm is using 500 units of labour and 100 units of capital to produce 100 units of output. Labour costs $5 per unit and capital $20 per unit. At these input levels, another unit of labour adds 5 units of output, while another unit of capital adds 40 units of output. If the firm uses 496 units of labour and 101 units of capital instead, what will happen?

Question

Answer

Cost will be unchanged, and output will increase by 20 units.

Answer

Cost will be unchanged, and output will increase by 35 units.

Answer

Output will be unchanged, and cost will decrease by $20.

Answer

Output will be unchanged, and cost will decrease by $40.

Answer

None of the above

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A firm is using 500 units of labour and 100 units of capital to produce 100 unit...

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