1.Business is booming at the local McDonald's restaurant. It is contemplating adding a new grill and french-fry machine, but the day supervisor suggests simply hiring more workers. How should the manager decide which alternative to pursue?

a.Compare the cost of the new grill and french-fry machine to the cost of additional workers. (which one is cheaper?)

b.Compare the additional output of the new grill and french-fry machine to the additional output of more workers.(which one produces more?)

c.Compare the additional output per dollar spent on the new grill and french-fry machine to the additional output per dollar spent on additional workers.

d.None of the above

2.Suppose a firm finds that the marginal product of capital is 60 and the marginal product of labor is 20. If the price of capital is $6 and the price of labor is $2.50.Should this firm adjust its mix of capital and labor?How?(i.e., more/less capital?more/less labor?)

3.A firm minimizes its costs by using inputs such that the marginal product of labor is 10 and the marginal product of capital is 20. The price of capital is $10 per unit. What must the price of labor be?

4.Suppose that the price of labor is $10 per unit and the price of capital is $20 per unit.

a.Assuming the firm is minimizing its cost, if the marginal product of labor is 50, what must the marginal product of capital be?

b.Suppose the price of capital increases to $25 per unit, while the price of labor stays the same. To minimize the cost of producing the same level of output, would the firm become more capital-intensive (i.e., more capital/less labor) or more labor-intensive?

5.

a.Suppose that the average age of students in your economics class is 23.7 years. If a new 19-year-old student enrolls in the class, will the average age in the class rise or fall?

b.Suppose that the average output per worker is 23.7 units.If a new worker produces 19 units,

i.is the marginal product of labor higher or lower than the average product?

ii.Will the average output per worker (average product) rise or fall when you hire the new worker?

6.

a.Barry Bond's career home run average in his first 15 years in major league baseball (through 1997) was 33 home runs per season. In 2001, he hit 73 home runs.What effect did his performance in 2001 have on his career home run average?

b.Suppose that you have 15 workers, and the average output per worker (average product) is 33.The 16^th worker will produce 73 more units.Will the average product rise or fall if you hire the 16^th worker?