Author Question: A firm purchases a factor of production in a competitive market. At the current purchase rate the ... (Read 52 times)

Sufayan.ah · **on:** Jul 1, 2018

A firm purchases a factor of production in a competitive market. At the current purchase rate the MRP of the factor is greater than the marginal expenditure for the factor. Thus, the firm

A) can increase profit by reducing the employment of the factor of production.
B) is now maximizing profit.
C) should not use this factor of production because it has no potential in generating a profit.
D) can increase profit by expanding the employment of the factor of production.

Question 2

When the market price is held above the competitive level, the deadweight loss is composed of:

A) producer surplus losses associated with units that used to be traded on the market but are no longer exchanged.
B) consumer surplus losses associated with units that used to be traded on the market but are no longer exchanged.
C) producer and consumer surplus losses associated with units that used to be traded on the market but are no longer exchanged.
D) There is no deadweight loss if the government uses a price floor policy to increase the price.