Reference: Ref 19-9 Reference: Ref 19-7 1. All perfectly competitive fast-food f
ID: 1204578 • Letter: R
Question
Reference: Ref 19-9
Reference: Ref 19-7
1. All perfectly competitive fast-food firms are hiring the profit-maximizing quantity of labor and are paying their workers $7 per hour. If the government raises the minimum wage to $8 per hour: a) the value of the marginal product will exceed the wage, and firms will hire more workers. b) the value of the marginal product will be less than the wage, and firms will lay off some workers. c) firms will increase their prices to keep the value of the marginal product equal to the wage. d) firms will have to exit the industry, since the value of the marginal product is always less than the wage.Explanation / Answer
1. C. firms will increase their prices to keep the value of the marginal product equal to the wage.
As P.MPL = W , So when W increase , either P or MPL must increase for two to be equal . hence P increases.
2. True
As the marginal productivity theory of income distribution refers to the idea that every factor of production that is sold in a factor market is paid its equilibrium value of the marginal product, or the additional value generated by employing the last unit of that factor in the factor market as a whole.
3. True
As the marginal productivity theory of income distribution refers to the idea that every factor of production that is sold in a factor market is paid its equilibrium value of the marginal product, or the additional value generated by employing the last unit of that factor in the factor market as a whole.
4. True
5 B. only if the new chef's daily wage is $360 or less
As P*MPL >= Wage , 30*12>= Wage
Wage<= 360
6. C. marginal product times the price per unit of output.
Ask the remaining questions as seprate questions , Max 4-5 as a single quesion.
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