If a Firm Faces Perfectly Competitive Product and Factor Markets

question 356

Multiple Choice

If a firm faces perfectly competitive product and factor markets and the marginal product of labor and capital are 4 and 9, respectively, while the wage rate is $2 and the rental rate on capital is $4, the firm should

• A) use relatively more labor.
• B) use relatively less labor.
• C) increase all inputs proportionately.
• D) decrease all inputs proportionately.

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Definitions:

Language Development

The process by which individuals acquire the ability to perceive, produce, and use words to understand and communicate. This process involves both the acquisition of spoken and written language.

Positive Reinforcement

A method in behavioral psychology where a desirable stimulus is added to encourage the repetition of a particular behavior.

Brain Size

The physical measurement or volume of the brain, often considered in relation to body size or intelligence.

Intelligence

The capacity for learning, reasoning, understanding, and similar forms of mental activities; aptitude in grasping truths, relationships, facts, meanings, etc.