The Diagram Below Shows the MRP Curve for a Firm

question 14

Multiple Choice

The diagram below shows the MRP curve for a firm producing copper plumbing pipe.The factor of production being considered here is hours of labour.
FIGURE 13-1
-Refer to Figure 13-1.Suppose this firm is facing MRP1,a wage rate of $12 per hour and is employing 150 units of labour.At this level of employment,

• A)the last unit of labour is adding less to the firmʹs cost than it is adding to the firmʹs revenue,so it should increase the use of labour.
• B)the last unit of labour contributes as much to the firmʹs costs as to the firmʹs revenues and so the firm should not change its use of labour.
• C)the last unit of labour is adding more to the firmʹs cost than it is adding to the firmʹs revenue,so it should reduce the use of labour.
• D)the firm has shifted the MRP curve to MRP2.
• E)the firm has shifted the MRP curve to MRP3.

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Definitions:

Straight-line Depreciation

A method of allocating the cost of a tangible asset over its useful life evenly.

Total Asset Turnover

An efficiency ratio indicating how well a company's assets are used to generate revenue from sales.

Average Total Assets

The average value of all the assets a company owns over a specific time period, calculated by adding the beginning and ending assets and dividing by two.

Net Sales

The amount of revenue generated by a company after deducting returns, allowances for damaged goods, and discounts.