APFIVE Least-Cost Rule in Factor Markets
All of the following statements about profit maximization in factor markets and the use of the least cost rule are true except:
A
The least cost rule requires that the ratio of marginal product to the input price be equalized across all factors to minimize total cost.
B
Firms increase their usage of the input that offers a higher marginal product per dollar in order to reduce production costs.
C
By applying the least cost rule, firms achieve cost efficiency by equating the marginal rate of technical substitution with the ratio of input prices.
D
A firm ignores the least cost rule when choosing the combination of labor and capital, focusing solely on maximizing output regardless of cost.
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