Assume That Skilled Labor Costs Twice as Much as Unskilled

question 62

Multiple Choice

Assume that skilled labor costs twice as much as unskilled labor, a profit-maximizing firm will

• A) always hire more skilled labor because it is more productive.
• B) always hire more unskilled labor because it is cheaper.
• C) hire until it equalizes the two marginal products.
• D) hire until the marginal product of unskilled labor is one-half that of skilled labor.
• E) hire until the marginal product of unskilled labor is two times that of skilled labor.

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Definitions:

Subsidiary

A company controlled by another company, often referred to as the parent company.

Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits.

Non-controlling Interest

A stake in a company that is less than 50%, implying that the holder does not have control over the company's operations.

Equity

The value of an ownership interest in a company, calculated as company assets minus its liabilities and representing the net assets owned by shareholders.