Question

In each of the following four cases, MRPL and MRPC refer to the marginal revenue products...

In each of the following four cases, MRPL and MRPC refer to the marginal revenue products of labor and capital, respectively, and PLand PC refer to their prices. Indicate in each case whether the conditions are consistent with maximum profits for the firm. If not, state which resource(s) should be used in larger amounts and which resource(s) should be used in smaller amounts.

a. MRPL = $8; PL = $4; MRPC = $8; PC = $4.

    These conditions are consistent with maximum profits for the firm:  (Click to select)  True  False  .

    Which resource should be used in larger and/or smaller amounts:  (Click to select)  Use less of both  Conditions are already consistent  Use more of both  Use less labor and more capital  Use more labor and less capital  .

b. MRPL = $10; PL = $12; MRPC = $14; PC = $9.

    These conditions are consistent with maximum profits for the firm:  (Click to select)  True  False  .

    Which resource should be used in larger and/or smaller amounts:  (Click to select)  Use less of both  Conditions are already consistent  Use more of both  Use less labor and more capital  Use more labor and less capital  .

c. MRPL = $6; PL = $6; MRPC = $12; PC = $12.

    These conditions are consistent with maximum profits for the firm:  (Click to select)  True  False  .

    Which resource should be used in larger and/or smaller amounts:  (Click to select)  Use less of both  Conditions are already consistent  Use more of both  Use less labor and more capital  Use more labor and less capital  .

d. MRPL = $22; PL = $26; MRPC = $16; PC = $19.

    These conditions are consistent with maximum profits for the firm:  (Click to select)  True  False  .

    Which resource should be used in larger and/or smaller amounts:  (Click to select)  Use less of both  Conditions are already consistent  Use more of both  Use less labor and more capital  Use more labor and less capital  .

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