You Have Been Hired by a Data Processing Firm to Provide

question 11

Multiple Choice

You have been hired by a data processing firm to provide economic advice. The owner of the firm tells you that the firm's only variable input is the number of data-entry operators. The hourly wage for data-entry operators is $10.00. The marginal revenue product curve for data-entry operators reaches its maximum at three workers with a marginal revenue product of $12.00. What advice would you give this firm?

• A) Hire three data-entry operators so as to maximize profits.
• B) Shut down immediately, as the firm is not able to cover all of its variable costs.
• C) Decrease the wage rate paid to data-entry operators so that their marginal revenue product will decrease.
• D) Hire data-entry operators until the marginal revenue product is equal to the wage-which will occur when more than three operators are employed.

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Definitions:

Expected Frequency

The predicted number of times an outcome is expected to occur in a statistical experiment, based on theoretical probability distribution.

Significance Level

The threshold used in statistical testing to determine if a result is statistically significant, commonly set at 0.05, indicating a 5% risk of concluding an effect exists when it does not.

Z-Test

A statistical test used to determine whether two population means are different when the variances are known and the sample size is large.

Degrees of Freedom

The total number of independent pieces of information that went into the estimation of a parameter or the calculation of a statistic.