Assume That a Perfectly Competitive Firm Faces a Fixed Wage

question 368

Multiple Choice

Assume that a perfectly competitive firm faces a fixed wage rate of $4 and a constant per-unit cost of capital of $2. If the marginal product of labor and capital are 16 and 6, respectively, then to maximize profits the firm should

• A) use relatively more labor.
• B) use relatively less labor.
• C) increase all inputs proportionately.
• D) decrease all inputs proportionately.

---

Definitions:

Escape Strategy

A plan or approach designed to exit a problematic or undesirable situation, often involving clever or strategic moves.

Competitive Pressures

The forces that compel companies to compete more effectively for market share through pricing, innovation, customer service, and other strategies.

Self-Directed Work Team

A group of employees who are given the autonomy and responsibility to manage themselves and make decisions regarding their work processes, often leading to increased innovation and productivity.

Job Control Unionism

A labor movement strategy focused on controlling hiring, work distribution, and other job-related conditions through collective bargaining.