|
|
1. If firms in a competitive industry are presently earning an economic profit, what long-run consequences exist for the number of firms in this industry and the market price of their product. Number of Firms Product Price a. Increase Increase b. Increase Decrease An industry earning a profit will attract firms, thus the number of firms will increase. However, competition will increase as well, and this will cause the price of that industries product to fall. c. Decrease Increase d. Decrease Decrease e. Decrease No change 2. A firm is a competitive seller of output at a market price of $3. The only resource required to create its product is labor, which is purchased competitively at a wage rate of $6 per hour. The last worker employed increases total output from 36 to 40 units per hour. What is the marginal revenue product for this worker? a. $3 b. $6 c. $12 (40-36) 3 d. $24 e. Indeterminable from the information given. 3. A firm requires labor and capital to produce a given output. Labor costs$8 per hour, and capital costs $12 per hour. At the current output level, the marginal physical product of labor is 40 units and the marginal physical product of capital is 60 units.
|
