16. If a firm hires labor and with its current employees W = VMPL , then profit:
ID: 1204701 • Letter: 1
Question
16. If a firm hires labor and with its current employees W = VMPL, then profit: can be increased by hiring more labor. is maximized. can be increased by increasing the wage rate. can be increased by hiring less labor. 17. If an individual labor supply curve is negatively sloped, the substitution effect dominates the income effect. True False 18. When a person receives more education, his or her _____ has increased. When a firm buys a new copy machine, it has purchased _____. human capital; land labor; capital labor human capital; physical capital labor; capital 19. Phil's Copy Studio pays its workers $60 per day and sells poster-size copies for $10 per print. Now suppose during the holiday season the price of poster-size copies increases to $12. What happens? The demand for labor increases. The demand for labor decreases. The quantity demanded of labor increases, but the demand for labor curve does not shift. The quantity demanded of labor decreases, but the demand for labor curve does not shift. 20. In the markets for goods and services, households demand goods and services and firms supply goods and services. False True 16. If a firm hires labor and with its current employees W = VMPL, then profit: can be increased by hiring more labor. is maximized. can be increased by increasing the wage rate. can be increased by hiring less labor.Explanation / Answer
16. At the profit maximizing level of equilibrium, the value of the marginal product of labor equal the wage rate that describes the labor demand curve.
Hence, the correct option is B.
17. If an individual labor supply curve is negatively sloped, it implies that the person works lesser the higher is his income. A fall income induces him to work less. This is the crux of substitution effect. Hence, in that case, the substitution effect dominates the income effect. So it is true.
18. The question makes a difference in two types of capital. When a person receives more education, his or her HUMAN CAPITAL has increased. When a firm buys a new copy machine, it has purchased PHYSICAL CAPITAL
Hence the correct option is D
19. Increase in the price of copies implies a contraction in its demand. So the demand for labor will fall. Thus Option B is correct.
20. In the markets for goods and services, households demand goods and services and firms supply goods and services. True.
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