Question

1.

f the supply of labor falls in the shrimping industry, firms will _______ employment and the wage rate will _______ until MRP equals the new wage.

		increase; increase
		increase; decrease
		decrease; increase
		decrease; decrease

2.

Is WidgetWorks at its profit-maximizing output level if an extra worker is hired and is paid $24 per hour to produce six products that sell for $10 each in a perfectly competitive market?

		No, it should hire fewer workers and increase production.
		No, it should hire more workers and increase production.
		No, because the marginal revenue product is too high.
		Yes, because it is making a profit on the widgets it has just produced.

Answer 1

1.A) Increase, Increase

If supply of labour falls in the shrimping industry,firms will increase employment and the wage rate will increase until MRP equals the new wage.

2.D) Yes, because it is making a profit on the widgets it has just produced.

As we can see cost of producing extra labour hour is $ 24 to producing 6 units while benefits for selling 6 units is 6× $ 10 = 60.hence profit for selling 6 units is $ 36.