Sam owns a candy factory and hires workers in a competitive labor market to pack cases of candy. The company's weekly output of cases of candy varies with the number of workers hired, as shown in the following table: Number ofworkersCases/week00116023103450458057006810 If each case sells for $5 more than the cost of the materials used in producing it, and the competitive market wage is $625/week, then how many workers should Sam hire each week?
A. 5
B. 3
C. 4
D. 2
Answer: C
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A purely competitive seller should produce (rather than shut down) in the short run:
A. only if total revenue exceeds total cost. B. only if total cost exceeds total revenue. C. if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost. D. if total cost exceeds total revenue by some amount greater than total fixed cost.
You explain to your roommate Surya, who makes beaded headbands, about an economic theory which asserts that consumers will purchase more of a product at lower prices than they will at higher prices. She contends that the theory is incorrect because over
the past two years she has lowered the price of her headbands and yet has seen a decrease in sales. How would you respond to Surya? A) Surya is right; she has evidence to back her claim. The theory must be erroneous. B) Surya is making the mistake of assuming that correlation implies causation. C) I will explain to her that she is making the error of reverse causality: it is the decrease in demand that has caused her to lower her prices. D) I will explain to her that there are some omitted variables that have contributed to a decrease in her sales such as changes in income.
Throughout U.S. history, entrepreneurial activity would occur when
(a) centralized economic planning was involved (b) distributed rights to profits were clear and protected (c) government intervention was pervasive (d) all of the above
Suppose TC = 10 + (0.1 ? q2). If p = 10, the firm's profit maximizing level of output is
A) 40. B) 50. C) 60. D) 0, since the firm will shut down.