Figure 18-5 The Figure Shows a Particular Profit-Maximizing, Competitive Firm's Value-Of-Marginal-Product (VMP)

question 194

Multiple Choice

Figure 18-5
The figure shows a particular profit-maximizing, competitive firm's value-of-marginal-product (VMP) curve. On the horizontal axis, L represents the number of workers. The time frame is daily.
-Refer to Figure 18-5. Assume that two points on the firm's production function are (L = 2, Q = 180) and (L = 3, Q = 228) , where L = number of workers and Q = quantity of output. The firm pays its workers $120 per day. The firm's non-labor costs are fixed, and they amount to $250 per day. We can conclude that

• A)the firm sells its output for $12 per unit.
• B)if the firm is currently employing 2 workers per day, then profit could be increased by $48 per day if a third worker is hired.
• C)the marginal cost per unit of output is $2.50 when output is increased from 180 units per day to 228 units per day.
• D)the firm's maximum profit occurs when it hires 3 workers per day.

---

Definitions:

Callable Bond

A kind of security that the issuer has the option to buy back prior to its maturity at a set price.

T-Bill Quote

The price or interest rate expressed for a Treasury bill; often quoted in terms of discount from face value.

Face Value

The nominal or dollar value printed on a bond or stock certificate; for bonds, it's the amount repaid to the holder at maturity, and for stocks, it is the original cost of the stock.

Bid

An offer made by an investor, trader, or dealer to buy a security, commodity, or currency.