If a Firm Faces Perfectly Competitive Product and Factor Markets

question 102

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 capital.
• B) use relatively less capital.
• C) increase all inputs proportionately.
• D) decrease all inputs proportionately.

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Definitions:

Sperm

The male gamete or reproductive cell involved in sexual reproduction.

Nematodes

A phylum of worms also known as roundworms, characterized by elongated, cylindrical bodies, and often found in soil and aquatic habitats.

Insects

A group of arthropods distinguished by having a body divided into three sections (head, thorax, abdomen), three sets of legs, complex eyes, and a single pair of antennae.

Invertebrates

Animals without a backbone, comprising a diverse group including insects, mollusks, and arachnids.