ecnftkinal3

When a production function exhibits a diminishing, but positive, marginal product of labor

output increases, but at a decreasing rate, as more workers are employed.

Carolyn's Pottery Shop produces vases that sell for $15 each. Assume that labor is the only input that varies for the firm. If Carolyn hires 10 workers, she can produce and sell 500 vases per week. If she hires 11 workers, she can produce and sell 560 vases per week. Carolyn pays each of her workers $400 per week. Which of the following is correct?

For the 11th worker, the marginal profit is $500

Which of the following is true about a monopolistically competitive firm?

It can earn an economic profit in the short run, but not the long run

Suppose that the wage paid to workers who detassel corn rises. What happens in the market for workers who weed soybean fields, given that workers who detassel corn can easily work weeding soybean fields?

The supply curve for soybean workers decreases.

Juan Pablo and Zak are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or not at all. If they both advertise on TV, each will earn a profit of $8,000. If they both advertise on radio, each will earn a profit of $14,000. If neither advertises at all, each will earn a profit of $20,000. If one advertises on TV and other advertises on radio, then the one advertising on TV will earn $12,000 and the other will earn $10,000. If one advertises on TV and the other does not advertise, then the one advertising on TV will earn $22,000 and the other will earn $4,000. If one advertises on radio and the other does not advertise, then the one advertising on radio will earn $24,000 and the other will earn $8,000. If both follow their dominant strategy, then Juan Pablo will

advertise on radio and earn $14,000.

Suppose that the organic-produce industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will

cause the market supply to decline and the price of organic produce to rise

The deadweight loss caused by monopoly is similar to

deadweight loss caused by a tax on a product.

Consider the market for medical doctors. Suppose the opportunity cost of going to medical school decreases for many individuals. Suppose it generally takes about ten years to become a practicing doctor. Holding all else constant, in ten years the equilibrium wage for doctors will

decrease

Robin owns a horse stables and riding academy and gives riding lessons for children at "pony camp." Her business operates in a competitive industry. Robin gives riding lessons to 20 children per month. Her monthly total revenue is $4,000. The marginal cost of pony camp is $100 per child. In order to maximize profits, Robin should

give riding lessons to more than 20 children per month.

As a result of a labeling mistake at the chemical factory, a farmer accidentally sprays weedkiller rather than fertilizer on half her land. As a result, she loses half of her productive farmland. If the property of diminishing returns applies to all factors of production, she should expect to see the marginal productivity of her remaining land

increase

Monopolists typically produce

larger quantities of output than competitive firms.

Mr. Rogers sells colored pencils. The colored-pencil industry is competitive. Mr. Rogers hires a business consultant to analyze his company's financial records. The consultant recommends that Mr. Rogers increase his production. The consultant must have concluded that Mr. Roger's

marginal revenue exceeds his marginal cost.

Willie's Wading Adventures sells hip waders for fishing and duck hunting in a perfectly competitive market. If hip waders sell for $100 each and average total cost per unit is $95 at the profit-maximizing output level, then in the long run

more firms will enter the market.

Monopolistic competition is similar to monopoly because both market structures are characterized by firms being

price makers rather than price takers.

Juanita is trying to convince the owner of a jewelry store to hire her. She argues that she could help the shop sell an additional three rings per day for a profit of $20 each. If the facts are not in dispute, but the owner does not hire her, then

the wage rate must be more than $60 per day.

Suppose that the market for labor is initially in equilibrium. Suppose that workers' tastes change so that they choose to retire at age 55 rather than age 67. Then the equilibrium wage

will rise, and the equilibrium quantity of labor will fall