Assume that a perfectly competitive firm faces a fixed wage rate of $4 and a constant per-unit cost of capital of $2. If the marginal product of labor and capital are 16 and 6, respectively, then to maximize profits the firm should
A) use relatively more labor.
B) use relatively less labor.
C) increase all inputs proportionately.
D) decrease all inputs proportionately.
Answer: A
You might also like to view...
How are corporate profits taxed in the United States?
A) Earnings are taxed first by state sales taxes and then as corporate profits at the Federal level. B) Corporate profits are not taxed at all. C) Earnings are taxed first as personal income then as corporate profits at the Federal level. D) Earnings are taxed first as corporate profits then as personal income after dividends are paid.
If planned aggregate expenditure is above potential GDP and planned aggregate expenditure equals GDP, then
A) the economy is in an expansion. B) actual inventory investment will be less than planned inventory investment. C) actual inventory investment will be greater than planned inventory investment. D) the economy is at full employment.
According to the text, which of the following does the United States import?
A. Electronics, cars, and food. B. Computers but not food. C. Cars but not shoes. D. Clothes but not electronics.
All ________ economies have been political dictatorships
A) centrally planned B) mixed C) market D) mixed and market