1. If the ratio between the price of labor and the price of capital (w/r) is smaller than the ration between the marginal product of labor and the marginal product of capital, the firm should hire more capital.

True

False

2. Normally the ratio between the price of a variable input and the marginal product of that input is equal to marginal cost.

True

False

3. When labor is a variable input the product of wage and marginal product of labor is equal to the profit-maximizing price.

True

False

4. If the price falls below the average total cost the firm may not shut down in the short run.

True

False