mt2prackey - Key Practice MT #2 SECTION I MC 1 c 2 e 3 b 4...

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Key Practice MT #2 SECTION I MC 1 c 2 e 3 b 4 d 5 d 6b 7 b 8 c SECTION II 1 a) Labor (L) Output (Q) MRP 0 0 - 1 2 12 2 6 24 3 11 30 4 15 24 5 18 18 6 20 12 7 21 6 8 20 -6 Last L where MRP > w is L =5. b) Negative MRP means hired someone and produced less. This could be since workers with fixed input so may get in each other’s way or poor worker. Since worker increases cost but decreases revenue, firm would never hire. c) TR = 6*18 – 15*5 - 50 = -17. Since profit is greater than –FC, firm produces in SR d) MC(18) = 15/3 = 5. MC(20) = 15/2 = 7.5. Since q=18 is the last quantity where P=6 > MC, then 18 is the profit maximizing quantity to produce, which is the quantity produced by 5 units of labor, which is the answer to (a) 2. a) L $ market supply 25 500000 demand L $ firm 25 80 MRP
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b) Shift MRP to the right. Hire more at the same wage. May or may not be market shift depending on how many firm in market are like this one. If demand shifts, it will increase as well. c) Increase wage and decrease total labor.
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mt2prackey - Key Practice MT #2 SECTION I MC 1 c 2 e 3 b 4...

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