Answer the question on the basis of the following information: Suppose a firm hires both labor (L) and capital (C) under purely competitive conditions. The price of labor is P L and that of capital is P C . The marginal product of labor is MP L and that
of capital is MP C . The firm sells its product competitively at a price of P X . Refer to the given information. Which of the following must pertain if the firm is to minimize the cost of producing any output?
A. MP C = MP L = P X .
B. MP C = P C and MP L = P L .
C. MP C /P C = MP L /P L .
D. MP C /P X = MP L /P X .
Answer: C
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The lower the amount of unemployment benefits citizens receive, the
A) higher the wage people must be offered before they accept a job. B) the longer people search for jobs. C) higher the opportunity cost of job search. D) the higher the natural unemployment rate. E) lower the opportunity cost of job search.
The above figure depicts the Edgeworth box for two consumers, Al and Bruce. Explain why point "a" cannot be a competitive equilibrium
What will be an ideal response?
Return to the case of Jan, the hyperbolic discounter from the previous question. Suppose she can sign a contract that requires her to give up money equivalent to a loss of X utils if she does not undertake the action. Assume she does not behave consistent with her plans without this contract. How high would the contractual value of X have to be to prevent her inconsistency?
a. C – B/2. b. B. c. C. d. B + C.
Most economists think that the Keynesian position is that
A) the wage rate will never fall and the price level will never adjust downward if the economy is in a recessionary gap. B) the time required before wages and prices adjust downward is short enough for the economy to be called self-regulating. C) the time required before wages and prices adjust downward is long enough for the economy to exist in a recessionary gap for a long time. D) the time required before wages and prices adjust downward if the economy is in a recessionary gap is rather long, but short enough for the economy to be considered self-regulating.