Exhibit 10-5 A perfectly competitive labor market
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Quantity of Labor
(thousands)
Marginal Revenue Product
Wage Rate 5 $25.00$ 5.00 10 20.0010.00 1515.0015.00 2010.0020.00 255.0025.00?
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In Exhibit 10-5, when the marginal revenue product is $20.00, firms should
A. continue hiring workers.
B. stop hiring workers.
C. start firing workers.
D. pay a wage above $15.00 to its workers
Answer: A
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If property rights are not enforced in a country
A) that country will grow more rapidly because of the reduction of law suits. B) that country's growth rate will not be affected. C) entrepreneurs are unlikely to risk their own funds investing in such an economy. D) the market system will still work smoothly.
When there is a shortage I. there is a tendency for price to increase. II. there is an excess quantity demanded
A) I only B) II only C) Both I and II D) Neither I nor II
If the production of a good generates a detrimental externality, then at that level of production of the good under perfect competition,
a. MU = MSC. b. P < MPC. c. MPC < MSC. d. MPC > MSC.
Suppose that you can hire your mechanic for up to six hours. The total benefit and total cost functions are B(H) = 300H - 20H2 and C(H) = 55H + 60H2. The corresponding formulas for marginal benefit and marginal cost are MB(H) = 300 - 40H and MC(H) = 55 + 120H. For how many hours should you hire your mechanic?
A. 1.53 hours B. 0.65 hours C. 6 hours D. 0 hours