A firm producing compact discs reports the following production information:
# of Workers Total Product
(boxes of CDs per hour)
0 0
1 125
2 225
3 305
4 365
5 405
6 425
The compact discs sell in a competitive market at a price of $0.20 per box. The firm hires workers in a competitive labor market at a wage of $12 per hour. The firm is currently hiring four workers and is considering hiring a fifth worker. What would you recommend the firm do? Why?
I would suggest that the firm not hire the fifth worker because his marginal revenue product will be $8 (40 ? $0.20) and this is less than the market wage rate. Therefore, the firm would lower its profits if it hired the fifth worker.
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Aggregation allows economists to ________ at the cost of ________.
A. make normative statements; ignoring positive analysis B. make positive statements; ignoring normative analysis C. see the big picture; obscuring the details D. see the details; obscuring the big picture
The production function describes the relationship between
A) the real wage and the quantity of labor supplied. B) real GDP and the quantity of labor employed. C) real and potential GDP. D) real and nominal GDP. E) potential GDP and the real wage rate.
Fixed costs are
A) costs that never change. B) costs that a firm incurs even when output is zero. C) not actually costs since they do not affect the decisions of a firm. D) costs that increase at a constant rate when output increases.
Suppose that a consumer is currently at an optimum when consuming goods A and B. Which of the following must be TRUE?
A. The marginal utility to price ratio of A is equal to the marginal utility to price ratio of B. B. The price of A is equal to the price of B. C. The marginal utility of A is equal to the marginal utility of B. D. The total utility from A is equal to the total utility from B.