The Optimal Quantity of Labor Rule Indicates That a Profit-Maximizing

question 8

Multiple Choice

The optimal quantity of labor rule indicates that a profit-maximizing firm will hire labor up to the point at which the MRP it receives from the last unit of labor hired is _______________ the MC of labor.

• A) equal to
• B) greater than
• C) less than

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Definitions:

Midpoint Method

A technique for calculating the percent change in which changes in a variable are compared with the average, or midpoint, of the starting and final values.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, reflecting the sensitivity of consumers to price changes.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a specific price level, at a given time.

Price Elasticity

Refers to a measure of how much the quantity demanded of a product changes in response to a change in its price.