If a firm faces perfectly competitive product and factor markets and the marginal product of labor and capital are 4 and 9, respectively, while the wage rate is $2 and the rental rate on capital is $4, the firm should
A. use relatively less labor.
B. decrease all inputs proportionately.
C. use relatively more labor.
D. increase all inputs proportionately.
Answer: A
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Figure 4.5 illustrates a set of supply and demand curves for hamburgers. An increase in demand and an increase in quantity supplied are represented by a movement from
A) point b to point d. B) point d to point a. C) point c to point d. D) point b to point a.
Assets that are easily convertible into money on short notice are referred to as being
A) diversified. B) durable. C) liquid. D) adaptable.
What is the primary difference between a sole proprietorship and a partnership?
A) Partnerships have more owners than do proprietorships. B) Partnerships can issue stocks and bonds while proprietorships cannot. C) Proprietorships have unlimited liability while partnerships have limited liability. D) There is no real difference between the two types of firms.
If an person believes that it is likely that interest rates will increase, she is likely to hold less
A) money. B) real assets. C) stock. D) bonds.