Question 1(Multiple Choice Worth 4 points) (05.03 MC) If a profit-maximizing firm's marginal resource cost for labor is greater than its marginal revenue product, what should the firm do to maximize profits? Increase production until MRC = MRP Increase the price of its product in the output market O Decrease its wage rate until MRC = MRP Decrease the amount of labor it employs until MRC = MRP O A firm in this scenario is earning supernormal profits and should not change its operation. Question 2(Multiple Choice Worth 4 points) (05.03 MC) Wage/$ 60 - MRC MRP Quantity How much should the profit-maximizing firm above pay in total labor costs when hiring the profit-maximizing quantity of labor? O Less than $60 O $60 O $360 O $420 O More than $420Question 3(Multiple Choice Worth 4 points) (05.03 MC) A firm pays $10 per unit of labor in a perfectly competitive labor market and produces sprockets, which sell at $4 per unit. The marginal product of the 12th unit of labor is 25 sprockets. What is its marginal revenue product of labor, and should the firm hire more labor? O $100; yes it should O $100; no it should not O $120; no it should not O $250; no it should not O $480; yes it should Question 4(Multiple Choice Worth 4 points) (05.03 MC) A business is employing labor and capital to pave a road. At the current combination of inputs, the marginal product of labor is 45 square feet per day, and the marginal product of capital is 135 square feet per day. If labor costs $900 per day and capital costs $2,700 per day, the firm should O hire less labor and more capital O hire more labor and less capital O hire less labor and less capital O hire more labor and more capital O maintain the current combinationQuestion 5(Multiple Choice Worth 4 points) (05.03 MC) The firm below must pay each laborer $20 per hour. Laborers Sprigots Produced per Hour 40 2 90 3 135 170 5 190 6 205 210 Assume that the price per unit of sprigots is $1. Based on the production table below, how many workers should the firm hire? 0 3 04 05 0 6 O Insufficient data to determine Question 6(Multiple Choice Worth 4 points) (05.03 MC) Which of the following accurately describes how a profit-maximizing firm determines its wage in a perfectly competitive labor market? It increases its wage until it intersects the marginal revenue product curve. It decreases its wage until it intersects the marginal revenue product curve. It changes its wage until marginal physical product equals marginal resource cost. It changes its wage until marginal revenue product equals marginal resource cost. It must accept the market wage because it is a wage-taker.Question 7(Multiple Choice Worth 4 points) (05.03 MC) 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 160 280 380 460 500 How many units of labor should the firm hire to maximize its profit and minimize costs? 01 02 0 3 0 4 05
