In the short run, the owner of a firm should continue to hire additional units of labor until:

a. the price of the product is equal to the wage rate divided by the marginal

product of labor.

b. the wage rate is equal to the price of the product multiplied by the marginal

product of labor.

c. the marginal product of labor is equal to the wage rate divided by the

product price.

d. Both a and c are correct.

e. All of the above are correct.

A firm uses capital and labor. Profit is maximized when:

I. P ~ MPL = PL.

II. P ~ MPK = PK.

III. MPL/PL = MPK/PK.

IV. PK ~ APK = P.

Which of the following is correct?

a. I only.

b. II only.

c. I and II only.

d. I, II and III only.

e. All of the above.

When the marginal product of labor (MPL) is greater than the average product of labor

(APL), the average product of labor:

a. must increase.

b. must decrease.

c. will remain the same because a change in MPL has no effect on MPL.

d. indeterminate.

e. None of the above.

As more and more labor is applied to amounts of all other inputs, the marginal product of

labor will:

a. eventually increase.

b. eventually decrease.

c. eventually remain constant.

d. All of the above may happen.

e. Cannot be determined on the basis of the information provided.