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Write down the firm’s profit maximizing problem. Be sure to identify the variables the firm can choose and which it takes as given. What should the firm facing the following scenarios do?

(a) If the marginal product of capital is greater than the rental price of capital.
(b) If the marginal product of labor is less than the wage.

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Answer: marginal Product on Capital

Explanation: A. The company should reduce the amount of capital that its spends on its rentals.

B.The value of the output produced by an additional unit of labor will be less than the cost of employing the additional unit and total profits will fall.