Rodrigo Operates a Dry-Cleaning Service and Charges Customers $5 Per

question 111

Multiple Choice

Rodrigo operates a dry-cleaning service and charges customers $5 per article of clothing.Based on his knowledge of operations,the 1,000 th piece of clothing costs him $4.95 to dry-clean.If he takes additional business,however,the 1,001st piece will cost $5 for the service.Does he take the additional business?

• A) No,he has hidden costs that far exceed his estimate of $5,so he loses money.
• B) No,taking on additional business doesn't earn him any money.
• C) Yes,if he turns away business,his service will be forced to close.
• D) Maybe.If a competitor is accepting that many customers,he must at least equal that amount.
• E) Yes.At a $5 cost,he breaks even and is indifferent.He necessarily turns away business when the cost of the additional unit exceeds the income.

Explain derived demand and its implications for labor and capital in various industries.

Understand how the law of diminishing returns affects the productivity of additional workers and the firm's decision-making.

Recognize the impact of changes in product demand on the demand for resources used in production.

Understand the relationship between the wage rate and the quantity of labor demanded.

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Definitions:

Perfectly Competitive

Refers to a market structure where numerous small firms compete against each other, and no single firm can influence the market price of goods or services.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, providing some degree of market power to each firm.

Concentrated Industries

Industries where a small number of firms hold a large market share, often leading to reduced competition.

Technological Advances

Innovations and improvements in technology that enhance productivity, efficiency, and product quality.