1.Which of the following accurately describes how a profit-maximizing firm determines its wage in a perfectly competitive labor market?

ANSWER CHOICES:

A)It increases its wage until it intersects the marginal revenue product curve.

B)It decreases its wage until it intersects the marginal revenue product curve.

C)It changes its wage until marginal physical product equals marginal resource cost.

D)It changes its wage until marginal revenue product equals marginal resource cost.

E)It must accept the market wage because it is a wage-taker.

2.A firm that produces bracelets sells the bracelets for $1. The firm can adjust its labor use, which costs $80 per unit, in the short run based on the following production function data.

Units of Labor Total Number of Bracelets Produced

1 160

2 280

3 380

4 460

5 500

3.How many units of labor should the firm hire to maximize its profit and minimize costs?

ANSWER CHOICES:

A)1

B)2

C)3

D)4

E)5

4.How much should the profit-maximizing firm above pay in total labor costs when hiring the profit-maximizing quantity of labor?

ANSWER CHOICES: