A Manager of a Firm with Market Power Faces the Marginal

question 31

Multiple Choice

A manager of a firm with market power faces the marginal revenue product and average revenue product curves shown below.The firm incurs weekly fixed costs of $1,800.The firm employs a single variable input,labor,which costs $600 per worker each week. Given the above,the 14^th worker hired adds $_______ to the firm's total revenue each week.

• A)$200 per week
• B)$400 per week
• C)$500 per week
• D)$700 per week
• E)$900 per week

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Definitions:

At-The-Money Call

An at-the-money call option is a type of option where the strike price is equal to the current price of the underlying asset.

Long Stock

Holding a stock position with the expectation that it will increase in value over time.

Net Payoff

The actual gain or loss experienced after executing a financial transaction, taking into account all costs involved.

Covered Call Strategy

An options strategy wherein an investor holds a long position in an asset and sells call options on that same asset to generate income from the option premiums.