The Labor Supply Curve Faced by a Large Firm in a Small

question 11

Multiple Choice

The labor supply curve faced by a large firm in a small city is given by w = 60 + 0.05L, where L is the number of units of labor per week hired by the large firm and w is the weekly wage rate that it pays.If the firm is currently hiring 1,000 units of labor per week, then the marginal cost of a unit of labor to the firm

• A)equals the wage rate.
• B)is twice the wage rate.
• C)equals the wage rate plus $100.
• D)equals the wage rate plus $50.
• E)equals the wage rate plus $150.

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Definitions:

Contribution Margin

The amount remaining from sales revenue after all variable expenses have been deducted, indicating the ability to cover fixed costs and generate profit.

Total Contribution Margin

The difference between total sales revenue and total variable costs, measuring how much revenue covers fixed costs and profits.

CVP Graph

A visual representation of the Cost-Volume-Profit analysis that illustrates the relationships between costs, volume, and profit.

Total Fixed Expenses

Total fixed expenses refer to the sum of all costs that do not change with the level of production or sales over a certain period.