A Competitive, Profit-Maximizing Firm Hires Labor Until The

question 129

Multiple Choice

A competitive, profit-maximizing firm hires labor until the:

• A) marginal product of labor equals the wage.
• B) price of output multiplied by the marginal product of labor equals the wage.
• C) real wage equals the real rental price of capital.
• D) wage equals the rental price of capital.

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Definitions:

Variable Costs

Costs that change in proportion to the level of activity or volume of goods produced in a business.

Fixed Costs

Expenses that do not change with the level of production or sales.

Depreciation Tax Shield

The Depreciation Tax Shield refers to the reduction in income tax a company achieves through deducting depreciation expenses, thus lowering its taxable income.

Straight-Line Method

An accounting method of depreciation where an asset's cost is reduced equally over its useful life.