Refer to Figure 13-5. The candy store represented in the diagram is currently selling Qa units of candy at a price of Pa. Is this candy store maximizing its profit and if it is not, what would you recommend to the firm?
A) Yes, it is maximizing its profit by charging the highest price possible.
B) No, it is not; it should lower its price to Pc and sell Qc units.
C) No, it is not; it should lower its price to Pb and sell Qb units.
D) No, it is not; since its marginal cost is constant, it should produce and sell as much candy as it can. It should sell Qd units at a price of Pd.
Question 2
One reason why, in the short run, the marginal product of labor might increase initially as more workers are hired is that
A) beyond some point, a firm has hired too many workers.
B) specialization allows a worker to focus on one task, thereby increasing her proficiency at that task.
C) the best workers are hired first and later hires are not as skillful.
D) the first workers hired get to use the best equipment.
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