The Perfectly Competitive Widget Industry Is in Long-Run Equilibrium

question 91

Multiple Choice

The perfectly competitive widget industry is in long-run equilibrium.A profit-maximizing manufacturer receives total revenue of $55,000.He uses his labor, $15,000 worth of wire, and $15,000 worth of steel to make the widgets.The manufacturer

• A)is earning an economic profit of $25,000.
• B)must have an opportunity cost of labor of less than $25,000.
• C)must have an opportunity cost of labor of exactly $25,000.
• D)must have an opportunity cost of labor of more than $25,000.

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Definitions:

Marginal Revenue Product

The additional revenue generated from employing one more unit of a factor, such as labor or capital.

Marginal Revenue Product

The extra income produced by using an additional unit of a resource or input in the production process.

Wage Rate

The fixed amount of compensation or payment a worker receives from an employer in exchange for labor, typically measured per hour or piece of work done.

Diminishing Marginal Product

The decrease in the output of an additional unit of input when all other inputs are held constant beyond a certain point.