Asked by Deekshith Rangoju on May 02, 2024
Verified
If only one firm in an industry could take advantage of a reduced wage and all other firms continue paying the old wage, how would one best describe the one firm's reaction to this reduced wage assuming labor is the only variable input? The marginal revenue product of labor curve:
A) would remain unchanged, and the firm would hire more labor at the lower wage.
B) shifts to the left, and the firm hires more labor at the lower wage on the new curve.
C) shifts to the right, and the firm hires more labor at the lower wage on the new curve.
D) shifts to the left, and the firm hires less labor at the lower wage on the new curve.
E) shifts to the right, and the firm hires less labor at the lower wage on the new curve.
Marginal Revenue Product
The additional revenue generated from employing one more unit of a factor of production, holding all other inputs constant.
Variable Input
An input in the production process that changes in quantity with the level of output, such as raw materials or labor hours.
Wage
The fixed regular payment, typically calculated on an hourly, daily, or piecework basis, made by an employer to an employee.
- Appreciate the consequences that shifts in input prices have on the profit optimization strategies of enterprises operating in a competitive field.
- Recognize how different market conditions (monopoly vs. competitive) affect marginal revenue product and labor demand.
Verified Answer
Learning Objectives
- Appreciate the consequences that shifts in input prices have on the profit optimization strategies of enterprises operating in a competitive field.
- Recognize how different market conditions (monopoly vs. competitive) affect marginal revenue product and labor demand.
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