11. A manager of a perfectly competitive firm observes that the marginal product of labor is 5 units per hour, the marginal product of capital is 40 units per machine , the wage is 20 per hour, the rental price of capital is 120 per machine, and the price of output is 5 per unit. To maximize profit, the manager should hire __ labor and rent __ capital. a. more, more b. more, less c. less,more d. less, less

To maximize profit, the manager should hire labor and rent capital up to the point where the marginal product per dollar is equal for both inputs. This is known as the marginal productivity per dollar rule.<br /><br />Let's calculate the marginal product per dollar for labor and capital:<br /><br />For labor:<br />Marginal product of labor = 5 units per hour<br />Wage = $20 per hour<br />Marginal product per dollar for labor = 5 units / $20 = 0.25 units per dollar<br /><br />For capital:<br />Marginal product of capital = 40 units per machine<br />Rental price of capital = $120 per machine<br />Marginal product per dollar for capital = 40 units / $120 = 0.333 units per dollar<br /><br />Since the marginal product per dollar for capital (0.333) is higher than that for labor (0.25), the manager should hire less labor and rent more capital to maximize profit.<br /><br />Therefore, the correct answer is:<br />c. less, more