Scenario 14.3: Suppose that a rm's demand curve for its product is as follows: Output Price of the Good 25 9 4O 8 54 7 67 6 79 5 90 4 Also suppose that labor is the only variable input of production, and that the total product of labor is: Amount of Total Output Labor 2 25 3 40 4 54 5 67 6 79 7 90 33) Given the data in Scenario 14.3, how much labor should the rm employ if labor costs $30 a unit? A) 3 units of labor B) 4 units of labor C) 5 units of labor D) 6 units of labor E) 7 units of labor Answer: B Diff: 3 Section: 14.1 34) Refer to Scenario 14.3. What is the marginal prot from hiring the third unit of labor? A) 30 B) 65 C) 85 D) 225 E) none of the above Answer: B Diff: 3 Section: 14.1 39) Suppose labor and capital are variable inputs. The wage rate is $20 per hour, the marginal product of labor is 30 units, the rental rate of capital is $100 per machine hour, and the marginal product of capital is 150 units. If the wage rate declines to $15 per hour, the rm employs more labor and the marginal product of labor declines to 20 units. Assuming the rental rate of capital remains the same, what happens to the amount of capital used by the rm? A) Decreases B) Increases C) No change D) We do not have enough information to answer this question. Answer: B Diff: 2 Section: 14.1 40) Suppose labor and capital are variable inputs. The wage rate is $20 per hour, the marginal product of labor is 30 units, the rental rate of capital is $100 per machine hour, and the marginal product of capital is 150 units. If the wage rate declines to $15 per hour, the rm employs more labor and the marginal product of labor declines to 20 units. Assuming the rental rate of capital remains the same, what is the marginal product of capital at the new optimal level of input usage? A) 100 units B) 133 units C) 150 units D) We do not have enough information to answer this question. Answer: B Diff: 1 Section: 14.1 21) Under what circumstances are the marginal expenditure for an input and the average expenditure always equal? Where there is a A) competitive buyer. B) competitive seller. C) monopoly buyer. D) monopoly seller. Answer: A Diff: 2