QUESTION 9 If the ratio between the price of labor and the price of capital (w/r

Question

QUESTION 9

If the ratio between the price of labor and the price of capital (w/r) is smaller than the ration between the marginal product of labor and the marginal product of capital, the firm should hire more capital.

True

False

2 points   

QUESTION 10

Normally the ratio between the price of a variable input and the marginal product of that input is equal to marginal cost.

True

False

2 points   

QUESTION 11

When labor is a variable input the product of wage and marginal product of labor is equal to the profit-maximizing price.

True

False

2 points   

QUESTION 12

If the price falls below the average total cost the firm may not shut down in the short run.

True

False

2 points

Explanation / Answer

9. False as with more capital MPK will decrease and MPL/MPK will rise more.

10. True as W/P=MPL and in case of perfect competition in the short run P=MC. Hence, W/MC=MPL

or, W/MPL=MC

11. False. W/P=MPL, thus, W=P.MPL

12. True. If P<AVC min then it will shut down only in the short run.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.