A Firm Operating in Competitive Input and Output Markets Purchases

question 1

Multiple Choice

A firm operating in competitive input and output markets purchases new technology, which shifts the total product schedule from A to B, as shown in the data in the table. At the market wage rate of $30 and product price of $5, this firm will

• A)hire the same number of laborers in both situations.
• B)increase the number of laborers hired from 4 to 6.
• C)decrease the number of laborers hired from 4 to 3.
• D)increase the number of laborers hired from 4 to 5.

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Definitions:

Break-even Sales

The amount of revenue required to cover both the variable and fixed costs of production, leading to a situation where a business makes neither profit nor loss.

Variable Costs

Costs that vary directly with the level of production output.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Operating Income

The profit realized from a business's core operations, excluding deductions of interest and tax, representing the efficiency of the company's core business.