T or F _______ 1. If the demand curve for the product that labor produces shifts

Question

T or F

_______ 1. If the demand curve for the product that labor produces shifts rightward, the demand curve for labor shifts rightward, too.

______ 2. The demand for low-skilled workers is less than that for high skilled workers.

_______ 3. An entrepreneur is an innovator and a risk bearer.

______ 4. There is an direct relationship between the productivity of labor and the demand for labor.

______ 5. Labor productivity is higher if the average product increases.

Problems

1. Assume that a purely competitive firm uses two resources, labor (L)and capital (C), to produce a product. The market price of this product is $1.00. The Marginal Product (MP) and prices of the resources (Pl) and (Pc)are shown in the following four situations below:

----------------------------------------------------------------------------------------

     MPl      MPc       Pl     Pc             MRPl              MRPc

I    30        20          30    40              ______            ______

II    20        20          10    10              ______            ______  

III   10        15           10   15              ______            ______  

IV   30        40           10    5               ______            ______

------------------------------------------------------------------------------------------

a. Calculate the marginal revenue product (MRP) of labor and capital in four situations and put in the above table.

b. Which situation would the firm be maximizing its profit? _______

2. Suppose a firm expects that a $15 million expenditure on R&D will result in an improved product which will increase its revenue by a total of $27 million 1 year from now. The firm also estimated the production cost of the improved product would be $25 million.

a. What is the expected rate of return on this R&D expenditure?________

b. Suppose the firm can get a bank loan at 10% to finance its $15 million, will the firm undertake the project? ____________ Explain.________________________________

c. Now suppose the interest rate of the loan rises to 15%, will this interest rate change the firm's R&D decision? ___________ Explain__________________________________

d. What is the highest interest rate of the loan that this firm will undertake the project?____

Explanation / Answer

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

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