“If the wage rate paid to one form of labor is twice the cost of anoth

“If the wage rate paid to one form of labor is twice the cost of another form of labor, the first type of labor must be twice as productive.” Comment.

Indicate whether the statement is true or false

ANSWER

true . Firms minimize cost by setting the ratio of marginal productivity per unit cost equally across all inputs. If one form of labor is twice as expensive as another, the firm will want the MP of the first type of labor to be twice that of the second.