Answer:
a-1. True, these conditions are consistent with maximum profits for the firm.
a-2. The correct option is b. Conditions are already consistent.
b-1. False, these conditions are NOT consistent with maximum profits for the firm.
b-2. The correct option is e- Use more labor and less capital.
c-1. True, these conditions are consistent with maximum profits for the firm.
c-2. The correct option is b. Conditions are already consistent.
d-1. False, these conditions are NOT consistent with maximum profits for the firm.
d-2. The correct option is d- Use less labor and more capital.
Step-by-step explanation:
Note: This question is not complete as question c is not complete and question d is omitted completely. To complete this question, questions c and d are therefore provided before answering the question as follows:
c. MRPL = $6; PL = $6; MRPC = $12; PC = $12
1. These conditions are consistent with maximum profits for the firm.
True / False
2. Which resource should be used in larger and/or smaller amounts?
a- Use less of both
b- Conditions are already consistent
c- Use more of both
d- Use less labor and more capital
e- Use more labor and less capital
d. MRPL = $22; PL = $26; MRPC = $16; PC = $19
1. These conditions are consistent with maximum profits for the firm.
True / False
2. Which resource should be used in larger and/or smaller amounts?
a- Use less of both
b- Conditions are already consistent
c- Use more of both
d- Use less labor and more capital
e- Use more labor and less capital
The explanation of the answers is now provided as follows:
The condition for the profit maximization of a firm is as follows:
MRPL / PL = MRPC / PC ……………………………. (1)
Therefore, we have:
a. MRPL = $8; PL = $4; MRPC = $8; PC = $4
MRPL / PL = $8 / $4 = 2
MRPC / PC = $8 / $4 = 2
Using equation (1), we have:
MRPL / PL = MRPC / PC = 2
a-1. These conditions are consistent with maximum profits for the firm.
True, these conditions are consistent with maximum profits for the firm. This is because MRPL / PL = MRPC / PC = 2.
a-2. Which resource should be used in larger and/or smaller amounts?
The correct option is b. Conditions are already consistent.
b. MRPL = $10; PL = $12; MRPC = $14; PC = $9
MRPL / PL = $10 / $12 = 0.83
MRPC / PC = $14 / $9 = 1.56
Using equation (1), we have:
0.83 = MRPL / PL < MRPC / PC = 1.56
b-1. These conditions are consistent with maximum profits for the firm.
False, these conditions are NOT consistent with maximum profits for the firm. This is because 0.83 = MRPL / PL < MRPC / PC = 1.56.
b-2. Which resource should be used in larger and/or smaller amounts?
The correct option is e- Use more labor and less capital. If this is done, it will result in MRPL / PL = MRPC / PC where the conditions will be consistent with maximum profits for the firm.
c. MRPL = $6; PL = $6; MRPC = $12; PC = $12
MRPL / PL = $6 / $6 = 1.00
MRPC / PC = $12 / $12 = 1.00
Using equation (1), we have:
MRPL / PL = MRPC / PC = 1
c-1. These conditions are consistent with maximum profits for the firm.
True, these conditions are consistent with maximum profits for the firm. This is because MRPL / PL = MRPC / PC = 1.
c-2. Which resource should be used in larger and/or smaller amounts?
The correct option is b. Conditions are already consistent.
d. MRPL = $22; PL = $26; MRPC = $16; PC = $19
MRPL / PL = $22 / $26 = 0.85
MRPC / PC = $16 / $19 = 0.84
Using equation (1), we have:
0.85 = MRPL / PL > MRPC / PC = 0.84
d-1. These conditions are consistent with maximum profits for the firm.
False, these conditions are NOT consistent with maximum profits for the firm. This is because 0.85 = MRPL / PL > MRPC / PC = 0.84.
d-2. Which resource should be used in larger and/or smaller amounts?
The correct option is d- Use less labor and more capital. If this is done, it will result in MRPL / PL = MRPC / PC where the conditions will be consistent with maximum profits for the firm.