The Figure Above Shows a Firm's VMP Curve

question 75

Multiple Choice

The figure above shows a firm's VMP curve.
-Suppose that a new technology doubles the marginal product of the workers and the price of the product does not change.As a result,the value of marginal product of the second worker

• A) remains $12.
• B) becomes $6.
• C) becomes $24.
• D) becomes $30.
• E) More information about the supply of labor is needed to answer the question.

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Definitions:

Capital Asset Pricing Model (CAPM)

Equation of the Security Market Line showing the relationship between expected return and beta.

Reward To Risk Ratio

A measure that evaluates the anticipated gains from an investment against the level of risk assumed to achieve these gains.

Security Market Line

A graphical representation of the expected return of all risky marketable securities as a function of their beta, or systemic risk, according to the capital asset pricing model.

Diversifiable Risk

Relates to the risk that can be reduced or eliminated from a portfolio by holding a variety of investments.