Question

vimizing rule for all firms in resource markets is The profit maximizing a) mrc = mvp b) mc>mp c) trc > trp di mic sp Figure 13.1 00+ Input price (Dollars per unit) - ---- -- MRC EKM -- -- ----MRP 10 20 30 40 50 Units of input Figure 13.1 shows marginal revenue product and marginal resource cost curves for a certain firm. In order to maximize profit, the firm should a) hire 30 units of this resource. b) produce 30 units of output. c) pay $2.00 for each unit of this resource. d) Both b) and c) The term "monopsony means a market with only one a) seller b) product c) resource. d) buyer. ollowing explains why the individual labor supply Which of the following explains why curve may bend backward? a) Leisure is always an inferior good. b) Beyond a point, the income effect workers to choose more leisure. c) Low paid workers face a higher oppon than high-paid workers. 01 H nh-ha anh ... . - le income effect of higher wages causes ace a higher opportunity cost of leisure

Answer 1

Answers are as follows:

06.a) The profit maximizing rule for all firms in resource markets is a)MRC=MRP.
Explanation: A firm maximizes its profits by continually adding resources as long as the marginal revenue product is greater than or equal to the marginal revenue cost. Hence, profit is maximized when MRP = MRC.

7. a)hire 30 units of this resource.
Explanation: The firm will hire only upto the point where marginal revenue product is equal to marginal revenue cost.

8.d)The term monopsony means a market with only one buyer.
Explanation: A monopsony is a market condition in which there is only one buyer.

9.b)beyond a point, the income effect of higher wages causes workers to choose more leisure.
Explanation: If you are being paid a higher wage you will substitute leisure for more work hours, so that the labour supply decreases when the wage increases.