When the Representative Firm Maximizes Profits

question 22

Multiple Choice

When the representative firm maximizes profits,

• A) it sells as much as possible.
• B) the wage equals average labor productivity.
• C) the wage equals marginal labor productivity.
• D) business taxes must be zero.

Recognize the historical trends in labor productivity growth in the U.S. and their implications.

Identify factors that influence productivity growth.

Understand the relationship between labor productivity, employment growth, and output per capita.

Evaluate the role of computers and technology in productivity growth.

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Definitions:

EPS

Earnings Per Share represents the portion of a company's profit allocated to each outstanding share of common stock, serving as an indicator of the company's profitability.

Breakeven Volume

The number of units that must be sold at a given price to cover all costs, with no profit or loss.

Variable Costs

Costs that change in proportion to the level of output or activity in a business.

Fixed Costs

Rent, salaries, and insurance charges are examples of expenses that are unaffected by changes in production or sales volumes.