Uses both labor and capital in manufacturing process

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Reference no: EM131097301

A firm uses both labor and capital in its manufacturing process which can be substituted for each other to some degree. The cost of labor is $15 per hour, and the last worker hired produced 20 units per hour. Machinery can be rented at $32 per hour, and marginal product of capital is 40 units per hour. What should the firm do?

a) increase its use of labor

b) increase its use of capital

c) Keep the mix of capital and labor the same

Explain the reason

Reference no: EM131097301

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