Author Question: A firm's marginal product of labor is 4 and its marginal product of capital is 5. If the firm adds ... (Read 74 times)

Kikoku · **on:** Jul 1, 2018

A firm's marginal product of labor is 4 and its marginal product of capital is 5. If the firm adds one unit of labor, but does not want its output quantity to change, the firm should

A) use five fewer units of capital.
B) use 0.8 fewer units of capital.
C) use 1.25 fewer units of capital.
D) add 1.25 units of capital.

Question 2

In the insurance market, moral hazard refers to the problem that

A) insurers can't tell high-risk customers from low-risk customers.
B) high-risk customers have an incentive to give false signals to make themselves look like low-risk customers.
C) companies may unfairly lump individuals together by race, sex, age or other characteristics in an attempt to use demographic data to pinpoint high-risk populations.
D) individuals are willing and able to pay different amounts for insurance, but must all be charged the same amount.
E) individuals may change their behavior after the insurance is bought, so that they behave in a more high-risk manner than they did before.