1. If an increase in the price of cars increases the marginal revenue product of auto...
1. If an increase in the price of cars increases the marginal revenue product of auto workers, then _____________ in the demand for their labor will occur.
a. no change
b. an increase
c. a decrease
d. none of the above
2) A firm would operate for maximum profit where the MFC = _________.
a. MFC
b. MRP
c. ATC
d. AVC
Homework Answers
Ans 1)
We know that
Marginal revenue product = Marginal Revenue*Marginal Product of labor
As MRP increases with increae in Prices Marginal Product of labor also increae that implictly increases real wage level which in turn Lowe's the demand for labor
Hence option C is correct answer
Ans 2)
MFC means Marginal factor cost and MFC= MC* MPL
whereas MRPL=MR*MPL
hence optmially MR=MC
Therefore we need MFC=MRP
Option B is correct answer
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