Liu's Potato Chips is a perfectly competitive firm currently employing 30 workers. The marginal revenue product of the 30th worker is $7.00 per hour. The wage rate is $8.00 per hour. To increase profits, this firm should
A. increase employment until the MRP of labor equals $8.00.
B. continue hiring 30 workers because the firm earns a surplus of $1.00 on each worker hired.
C. decrease employment until the MRP of labor equals $8.00.
D. increase the price of potato chips so that the marginal revenue product increases to $8.00 per hour.
Answer: C
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Ham and eggs are complements. If the price of ham rises, the demand for eggs will
A) increase or decrease but the demand curve for ham will not change. B) decrease and the demand curve for ham will shift rightward. C) not change but there will be a movement along the demand curve for eggs. D) decrease and the demand curve for eggs will shift leftward.
A "conservative" economist who advocates an active fiscal policy would recommend
A. tax cuts during recession and reductions in government spending during inflation. B. tax increases during recession and tax cuts during inflation. C. tax cuts during recession and tax increases during inflation. D. increases in government spending during recession and tax increases during inflation.
If incomes are rising, in the market for a normal good,
a. its price will rise and the quantity exchanged will rise. b. its price will rise and the quantity exchanged will fall. c. its price will fall and the quantity exchanged will rise. d. its price will fall and the quantity exchanged will fall.
When the government taxes labor earnings we can expect people to
a. work more so they can keep the same standard of living. b. work less and enjoy more leisure. c. quit their present job and find one that pays better. d. stop working altogether and go on welfare.