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. In competitive labor markets, the marginal cost of an additional unit of labor:
A. is equal to P L × MP L .
B. is equal to MP L /P L .
C. is equal to P L .
D. cannot be determined from the information given.
Answer: C
You might also like to view...
The reduction or covering of a foreign exchange risk is called
A) hedging. B) speculation. C) intervention. D) arbitrage.
Suppose an econometrician discovers that during the past decade, lower unemployment rates have always been accompanied by higher inflation rates. When asked how to reduce unemployment, the econometrician recommends the policy of increasing the money supply to trigger more inflation. Explain why this policy may fail to work in a world where people have rational expectations.
What will be an ideal response?
The field of macroeconomics studies ________ and microeconomics studies ________.
A. variables within a single economy; international variables B. economic aggregates; individual markets C. individual markets; economic aggregates D. international variables; variables within a single economy
If the price of labor rises relative to the price of capital, the cost-minimizing ratio of capital usage to labor usage (i.e., the ratio K/L) will
A. be unchanged. B. decrease. C. increase. D. cannot determine without more information