A perfectly competitive firm discovers that its MRPL divided by the wage equals 1.25. The firm should
A) check the MRP of the other inputs and divide them by their prices. If they are all equal to 1.25 it is maximizing profits.
B) hire more labor.
C) purchase more capital.
D) try to pay a lower wage rate.
B
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The very existence of an insurance policy may cause people to behave in a riskier manner, which will increase the moral hazard problem
Indicate whether the statement is true or false
Here are three possible definitions of "Compensating Variation": I. the amount a person would be willing to pay to avoid a price increase. II. the amount of additional income needed to allow a person to restore his or her utility back to its initial level after it has been reduced by a price increase. III. the amount of income that a person who experienced a price increase would be willing to pay
to see the price return to its earlier level. Which of these definitions is (are) correct? a. Only I b. I and II c. II and III d. Only III
Entrepreneurs, if successful, earn
a. rent b. profit c. wages d. salary e. interest
State whether each condition is consistent with profit maximization or if production should increase or decrease.
