A firm in a competitive industry faces a market price for output of $25 and a wage rate of $750. At the current level of employment (50 units of labour), the marginal product of labour is 20. In order to maximize profit, the firm should

Question

Answer

hire more labour because hiring another unit of labour would increase profit by $500.

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hire less labour because the firm is suffering a loss of $12 500.

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none of the above.

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keep the level of employment the same because the firm is earning a profit of $500.

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hire less labour because hiring the last unit of labour decreased profit by 250.

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A firm in a competitive industry faces a market price for output of $25 and a wa...

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