A profit-maximizing firm will increase its use of capital and decrease its use of labour when the:
a) marginal product of capital is higher than the marginal product of labour.
b) marginal product of capital, per dollar spent on capital, is less than the marginal product of labour, per dollar spent on labour.
c) average product of capital is higher than the average product of labour.
d) total product of capital is higher than the total product of labour.
e) marginal product of capital, per dollar spent on capital, is greater than the marginal product of labour, per dollar spent on labour.
Ans: e) marginal product of capital, per dollar spent on capital, is greater than the marginal product of labour, per dollar spent on labour.
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Suppose the daily demand for Coke and Pepsi in a small city are given by QC = 90 - 100PC + 400(PP - PC) and QP = 90 - 100PP + 400(PC - PP), where QC and QP are the number of cans Coke and Pepsi sell, respectively, in thousands per day. PC and PP are the prices of a can of Coke and Pepsi, respectively, measured in dollars. The marginal cost is $0.45 per can for both Coke and Pepsi. What is Coke's inverse demand function?
A. QC = (90 - 400PP) - 500PC B. PC = (0.18 + 0.8PP) - 0.002QC C. QC = (490 - 400PC) D. PC = (400 - 500QC)
Suppose the value of income elasticity of demand for a private college education is equal to 1.5. This means that:
A. every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education. B. a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent. C. a 10 percent increase in income causes a 15 percent increase in the quantity of private college education purchased. D. a 15 percent increase in income causes a 10 percent increase in the quantity of private college education purchased.
A firm that is the only firm in the industry may not behave like a monopolist in order to deter entry of other firms. ?
Answer the following statement true (T) or false (F)
Which of the following cost relationships is not true?
A) AFC = AC - MC B) TVC = TC - TFC C) The change in TVC/the change in Q = MC D) The change in TC/ the change in Q = MC