firm’s profits. The firm should hire (more/fewer/the
same) hours of labour in order to maximize its profits.
b. An excavation company digs holes (one unit of output),
which produce revenue of $100 per unit. The firm pays a
rental price of $200 per day for a backhoe. The last day
hired of this machine produces three units of output. This
factor’s MRP is. The last day rented contributes
to the firm’s profits. The firm should hire
(more/fewer/the same) day-rentals of the backhoe in
order to maximize its profits.
c. A software developer produces software programs (one
unit of output), which produce revenue of $12 000 per
unit. The firm hires programmers for $6000 per month. If
the last month of labour hired produces 0.5 units of
output, the MRP for the last month hired is. This last
unit of the factor contributes to the firm’s profits.
This firm should hire (more/fewer/the same) months of
labour in order to maximize its profits.
3. Fill in the blanks to make the following statements correct.
a. If a factor of production can be easily induced to shift to
an alternative use, then we say the factor is highly
b. If a factor of production is highly between uses, that
factor’s elasticity of supply is high.
c. If it is difficult for a factor of production to shift between
uses, that factor’s elasticity of supply will be quite
d. Consider the mobility among firms and industries of a
pharmaceutical salesperson. This worker is likely to be
