Question 1
Firms will employ an input up to the point where
◦ the wage rate equals the productivity of capital.
◦ its marginal cost equals its marginal product.
◦ the input's price equals its marginal revenue product.
◦ the input's price equals its marginal product.
Question 2
Liu's Potato Chips is a perfectly competitive firm currently employing 30 workers. The marginal revenue product of the 30th worker is $7.00 per hour. The wage rate is $8.00 per hour. To increase profits, this firm should
◦ decrease employment until the
MRP of labor equals $8.00.
◦ increase employment until the
MRP of labor equals $8.00.
◦ continue hiring 30 workers because the firm earns a surplus of $1.00 on each worker hired.
◦ increase the price of potato chips so that the marginal revenue product increases to $8.00 per hour.
A graphical representation of the marginal value theorem.
Potato plant.
Marginal Supply - Demand Curve
Project Management: Achieving Competitive Advantage
Fish and Chips or Fries
Specialized Workers: Soldier Ant