The profit-maximizing rule for a perfectly competitive firm when ...

[acc299]

The profit-maximizing rule for a perfectly competitive firm when choosing its level of output is to produce where price is equal to marginal cost.
 
  The profit-maximizing rule for a firm hiring labor in a perfectly competitive labor market is to hire workers up to the point where the marginal revenue product equal to the market wage. How are these two rules related to one another?

Question 2

Under the Bretton Woods system, central bankers could obtain foreign currency loans from the
 
  A) Bank of England. B) U.S. Treasury Department.
  C) International Monetary Fund. D) World Trade Organization.

[ecabral0]

Answer to Question 1

In both cases, the firm is comparing the cost of production with the potential revenues from the sale of the product at the margin. In the first (P=MC), the firm is comparing the price of the output with the cost of production directly. In the second (W=MRP), information on output price is included in marginal revenue product and the cost of production is represented by the wage paid to labor.

Answer to Question 2

C

[acc299]

Excellent

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