In each of the following four cases, MRPL and MRPC refer to the marginal revenue products of labor and capital, respectively, and PL and PC refer to their prices. Indicate whether each of the following is 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) False True
Which resource should be used in larger and/or smaller amounts: (Click to select) 1.) Use less of both 2.)Conditions are already consistent 3.)Use more of both 4.)Use less labor and more capital 5.)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) False True
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
