Homework 3 part 2 - 10(2 points When comparing Scenario A...

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10. (2 points) When comparing Scenario A to Scenario B, the firm now earns _______ profit. A) more B) less Feedback: Note that the firm changes its behavior due to the increase in output price. The firm hires more workers and makes more output in order to maximize profit. Remember that profit maximization requires that workers be hired up to the point where W=MRP. Consider the situation if the firm stayed with only 3 workers. Once the price of output rises to $22, at 3 workers the wage is 150 and the MRP is 176. So at 3 workers, WMRP for the 5th worker. Table for Individual Question Feedback Points Earned: 2.0/2.0 Correct Answer(s): A 11. SCENARIO C - We return to the original conditions (from scenario A) and now we let wages change. In particular, an increase in labor supply lowers the wage that the firm needs to pay to $130 . For question 11. Fill in Table C - Each box is worth ½ point for a total of 6 points for Table C TABLE C- The wage has changed to $130 but the price of output (Q) is back at its original value of $20.
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  • Fall '10
  • staff
  • Macroeconomics, Correct Answer, Individual Question

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