If the Hourly Wage Is $50 and the Price of Output

question 3

Multiple Choice

If the hourly wage is $50 and the price of output is $25,then,in the short run,

• A) the firm should add workers if they add 1/2 or more units to output.
• B) the firm should add workers if they add 2 or more units to output.
• C) the firm should hire two workers.
• D) the firm should reduce employment until the wage falls to $25.

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Definitions:

Hurdle Rate

A financial metric indicating the minimum return on investment required for a project or investment to be considered acceptable.

Internal Rate of Return

A financial metric used to estimate the profitability of potential investments, calculating the discount rate that makes the net present value of all cash flows from the investment equal to zero.

Present Value

The present value of a future amount of money or a series of cash flows, calculated using a given interest rate.

Annuity

A finance-related product designed to issue a predetermined series of payouts to an individual, typically aimed at serving as an income source for retirement.