This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Sample Exam 2 Questions 1. The marginal revenue product curve of a firm operating in a competitive labor market and in a competitive product market slopes downward because (a) the marginal revenue decreases as more labor is hired. (b) the marginal product of labor decreases as more labor is hired. (c) the firm faces a downward-sloped marginal cost of labor curve. (d) the firm faces a constant wage, regardless of how much labor it employs. (e) The firm doesnt use capital in the production process. 2. Consider the following table. Table 1: E Q 1 3 2 7 3 12 4 20 5 31 6 36 7 40 8 43 9 45 10 46 Suppose that the labor market and the product market are competitive. Let the price at which the firm sells its output be p = $4 per unit and let the rental rate of capital r = $1 per unit of capital. For simplicity assume that the firm employs 5 units of capital. If the wage rate is w = $18 per unit of labor, how many units of labor should the firm hire to maximize its profit?...
View Full Document
This note was uploaded on 01/19/2012 for the course ECON 320 taught by Professor Shin during the Fall '08 term at University of Michigan.
- Fall '08