The Table Gives Marginal Product Data for Resources a and B

question 272

Multiple Choice

The table gives marginal product data for resources a and b. The output of these independent resources sells in a purely competitive market at $1 per unit. Assuming the prices of resources a and b are $10 and $20 respectively, when the firm hires the profit-maximizing combination of resources, its economic profit will be

• A)$140.
• B)$222.
• C)$117.
• D)$82.

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Definitions:

Incidence

The measure or manner in which economic burdens or benefits are distributed among participants in a market.

Gasoline

A volatile flammable liquid derived from petroleum, used mainly as fuel in internal combustion engines.

Tax Levied

A compulsory financial charge or some other type of levy imposed on a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Tax Incidence Analysis

The study of who bears the burden of taxes, in terms of economic impact and how it affects different market participants.