Figure 18-5 The Figure Shows a Particular Profit-Maximizing, Competitive Firm's Value-Of-Marginal-Product (VMP)

question 194

Multiple Choice

Figure 18-5
The figure shows a particular profit-maximizing, competitive firm's value-of-marginal-product (VMP) curve. On the horizontal axis, L represents the number of workers. The time frame is daily.
-Refer to Figure 18-5. Assume that two points on the firm's production function are (L = 2, Q = 180) and (L = 3, Q = 228) , where L = number of workers and Q = quantity of output. The firm pays its workers $120 per day. The firm's non-labor costs are fixed, and they amount to $250 per day. We can conclude that

• A)the firm sells its output for $12 per unit.
• B)if the firm is currently employing 2 workers per day, then profit could be increased by $48 per day if a third worker is hired.
• C)the marginal cost per unit of output is $2.50 when output is increased from 180 units per day to 228 units per day.
• D)the firm's maximum profit occurs when it hires 3 workers per day.

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Definitions:

Statement of Cash Flows

A financial report that provides a summary of a company's cash inflows and outflows over a specific period.

Tangible Capital Assets

Physical assets owned by a business that are used in its operation and have a useful life longer than one fiscal year, such as buildings and machinery.

PSAB

stands for Public Sector Accounting Board, which sets accounting standards for public sector entities in some countries, focusing on transparency and accountability.

Controlled Entities

Entities over which another entity has the power to govern financial and operating policies, typically through ownership of a majority voting interest.