Praxis II: Economics Content Knowledge Exam Prep

Answer - C - Costs are minimized when all of the marginal products of all the inputs are equal.

Key Takeaway: Almost always, businesses operate at output levels in which marginal product is diminishing. As long as the marginal product of one input is even a little higher than all of the others, the business will perform better if it uses more of that input and fewer of others. At the time that all marginal products are equal, the business’s costs will increase if they use more of one input at the expense of the other inputs.