ECON Question

CFA Level I
#1
  1. With multiple inputs, firms will expand their usage of each input until: A. total product divided by price is equal across all inputs. B. average product divided by price is equal across all inputs. C. derived demand divided by price is equal across all inputs. D. marginal product divided by price is equal across all inputs.
#2

D

#3

I dunno what they want in this question… but usually, MRP(Input) = cost of input i.e. MRP(Labor) = Wages MRP(Captal) = CoC I’ll go with D too… A guess!! - Dinesh S

#4

Dinesh question refers to cost minimizing condition for any level of output - when marginal product of each resource divided by its respective price is equal for all inputs (as stated in schweser) therefore D

#5

florinpop, do you have by chance the page number in schweser or parkin? thanks

#6

I have an older book its page 202 or look for Necessary conditions for cost minimizing employment levels on the index

#7

nope… did not find it. i’ll just try to remember if it shows up. :slight_smile: thanks for your help though!

#8

great… its D

#9

barthezz basically it tells you that quantities should be adjusted in such way that one dollar invested in any of the factors (resources) of a company would create the same effect in production

#10

I couldn’t find it in the CFAI text, I’m not sure if this is still relevent for this yr’s test either way, 1 simple fact, so it probably won’t hurt to just memorize it…

#11

thanks for the explanation florinpop. greatly appreciated.