Assume That a Purely Competitive Firm Uses Two Resources, Labor

question 183

Multiple Choice

Assume that a purely competitive firm uses two resources, labor (L) and capital (C) , to produce a certain product. In which situation would the firm be maximizing profit? $\begin{array}{|c|c|c|c|c|} \hline & \text { MRPL } & \text { MRPC } & \text { PL } & \text { PC } \\\hline \text { A } & \$ 100 & \$ 200 & \$ 300 & \$ 400 \\\hline \text { B } & \$ 100 & \$ 200 & \$ 200 & \$ 100 \\\hline \text { C } & \$ 150 & \$ 200 & \$ 150 & \$ 200 \\\hline \text { D } & \$ 300 & \$ 400 & \$ 300 & \$ 200\\\hline \end{array}$

• A) Case A
• B) Case B
• C) Case C
• D) Case D

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Definitions:

Monthly Interest Rate

The interest rate applied to a loan or debt for a one-month period, often used to calculate the monthly interest payments.

Variable Cost

A type of cost that varies with production volume, increasing as production increases and decreasing as production decreases.

Carrying Cost

Expenses incurred by holding inventory or assets over a period, including storage, insurance, and opportunity costs.

Present Value

The present value of an amount of money or series of payments to be received in the future, calculated using a particular interest rate.