The marginal cost of labor for a perfectly competitive firm isgiven by: A)its ma

Question

The marginal cost of labor for a perfectly competitive firm isgiven by:

A)its marginal revenue product curve.
B)the market wage rate.
C)the change in total revenue that results from employing anadditional worker.
D)the marginal product of labor.
E)the demand curve for labor.

2.

Which of the following is true if the total variablecost curve is rising?

A)Marginal cost is increasing.
B)Average fixed cost is increasing.
C)Marginal cost is decreasing.
D)Average fixed cost is constant.

3.

A monopsonist can pick the ____, while a monopolist can pick____.

Explanation / Answer

1. In a perfectly competitive market firms aim to maximizeprofit by aiming to sell where marginal costs meet marginalrevenue, which is where they generate the most profit. So theanswer is A
2. Let us look through the options A)marginal cost equals the change in total (or variable) costthat comes with each additional unit produced. So when variablecost increases the change in cost will also increase which meansthat marginal cost will increase. So when the Variable cost curveis rising the marginal cost curve will also be rising. So A isTrue B) Average fixed cost is decreasing. The fixed cost isconstant throughout. So the average fixed cost will never change.So B is False C) Marginal cost is decreasing. Since we proved that marginalcost is increasing marginal cost cant be decreasing. So C isFalse D) Average fixed cost is constant. The fixed cost will neverchange so the average fixed cost will always be constant. D isTrue Answer is A and D

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