If a Firm Is a Price Taker in Both the Labor

question 3

Multiple Choice

If a firm is a price taker in both the labor market and the output market,it will

• A) earn zero economic profit in the short run.
• B) hire labor until the marginal product of labor equals zero.
• C) hire labor until the marginal revenue product equals the output price.
• D) hire labor until the marginal revenue product equals the wage rate.

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Definitions:

Demand Curve

A chart that displays the connection between a product's price and the amount of the product buyers are prepared and able to buy at different price levels.

Marginal Cost Curve

A graphical representation showing how the cost of producing one additional unit of a good changes as the production volume changes.

Monopoly Market

A market structure characterized by a single seller who has exclusive control over the supply of a product or service, and where there are high barriers to entry for other firms.

Perfectly Competitive

A market structure characterized by many sellers offering identical products, free entry and exit, and full information, leading to price taking behavior.