When demand is perfectly inelastic, the demand curve is
A) horizontal.
B) vertical.
C) upward sloping.
D) downward sloping.
Answer: B) vertical.
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A firm finds that it must increase wages to attract extra workers. The firm will hire labor up to the point where the marginal
A. revenue product equals the additional cost of hiring an extra worker. B. revenue product of labor is greater than the wage rate. C. product of labor equals the wage rate. D. revenue product of labor starts to decline.
The demand for labor is downward-sloping because of
A. Falling MC. B. Rising P. C. Rising MPP. D. Diminishing returns to labor.
For a perfectly competitive firm, profit maximization occurs when
A) marginal revenue equals average total cost. B) marginal revenue equals marginal cost. C) marginal cost is equal to average total cost. D) average total cost is at its minimum.
The substitution effect shows that
A. if the price of a good falls, consumers buy less of all goods. B. if the price of a good falls relative to all other goods, consumers buy less of that good and more of all others. C. if the price of a good rises, consumers buy less of that good and more of others. D. if the price of a good increases, consumers buy more of that good and less of all others.