1.An industry utilizes capital and two types of labor. Unskilled labor is a subs
ID: 1095698 • Letter: 1
Question
1.An industry utilizes capital and two types of labor. Unskilled labor is a substitute for capital while the skilled labor is complementary to capital. An increase in the price of capital will
Question 1 options:
a.cause the demand for skilled labor to rise and the demand for unskilled labor to fall.
b.cause the demand for labor to increase, raising wages of both skilled and unskilled labor.
c.because the wage of unskilled labor to rise relative to the price of skilled labor.
d.induce the firms in the industry to cut back on all levelscapital, unskilled and skilled labor.
2.Suppose the market price of zinc doubles. Which of the following scenarios is most likely?
Question 2 options:
a.The demand for zinc miners will decrease, reducing the market price back to its original price.
b.The demand for zinc will increase, raising the market price further.
c.The demand for zinc miners will increase, raising the market wage rate.
d.The demand for zinc miners will decrease, reducing the market wage rate
3.A perfectly competitive firm is hiring variable resources M and N. It will minimize total costs
Question 3 options:
a.MRPm/MFCm = MRPn/MFCn.
b.Pm/MPPm = Pn/MPPn.
c.MRPm MFCm = MRPn MFCn.
d.MPPm/Pm = MPPn/Pn.
4.If a firm faces perfectly competitive product and factor markets and the marginal product of labor and capital are 4 and 9, respectively, while the wage rate is $2 and the rental rate on capital is $4, the firm should
Question 4 options:
a.decrease all inputs proportionately.
b.use relatively more capital.
c.increase all inputs proportionately.
d.use relatively less capital.
5.A firm wanting to maximize profits should operate in such a way that
Question 5 options:
a.MRP equal MFC in the input market but MC must exceed MR in the output market.
b.marginal revenue must be equal to the marginal revenue product.
c.the MRP of each input is equal to or greater than its MFC.
d.none of the above
Explanation / Answer
a.cause the demand for skilled labor to rise and the demand for unskilled labor to fall
c.The demand for zinc miners will increase, raising the market wage rate.
a.MRPm/MFCm = MRPn/MFCn.
b.use relatively more capital.
c.the MRP of each input is equal to or greater than its MFC.
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