1) A manager hires labor and rents capital equipment in a very competitive market. Currently the wage rate is $11 per hour and capital is rented at $10 per hour. If the marginal product of labor is 70 units of output per hour and the marginal product of capital is 60 units of output per hour, should the firm increase, decrease, or leave unchanged the amount of capital or labor used in its production process? a) The firm should increase capital. b) The firm should decrease capital. c) The firm should leave capital unchanged. d) The firm should leave labor unchanged. 2) The decline in marginal product of labor when the number of employees goes up, holding all other inputs constant, is known as: a) the law of diminishing marginal rate of technical substitution.. b) the law of diminishing marginal utility. c) the law of diminishing marginal capital. d) the law of diminishing marginal labor. 3) A property of a production function stating that as less of one input is used, increasing amounts of another input must be employed to produce the same level of output, is known as: a) the law of diminishing marginal rate of technical substitution. b) the law of diminishing marginal returns. c) the law of diminishing marginal labor. d) the law of diminishing marginal utility. Identify whether each of the following transactions involves spot exchange, contract, vertical integration or horizontal integration. 4) Barnacle, Incorporated, purchases 21 tons of structural steel from the local Home Depot to manufacture conveyor frames. a) Contract b) Spot exchange c) Vertical integration d) Horizontal integration