Asked by Matthew Valenzuela on Jun 03, 2024
Verified
A competitive employer is using labor in such an amount that labor's MRP is $10 and its wage rate is $8.This firm:
A) should hire more labor because this will increase profits.
B) should hire more labor,although this may either increase or decrease profits.
C) is currently hiring the profit-maximizing amount of labor.
D) is selling its product in an imperfectly competitive market.
MRP
Stands for Material Requirements Planning, a system for calculating the materials and components needed to manufacture a product.
Wage Rate
The amount of money paid to workers for their services, usually expressed per hour or per unit of work done.
Competitive Employer
A firm that operates in a competitive labor market, setting wages based on supply and demand rather than having the power to influence market conditions.
- Learn the concept of marginal revenue product (MRP) and understand its importance in decisions related to hiring.
- Investigate the connection between modifications in wage rates and the decisions made by businesses regarding employment across distinct market configurations.
Verified Answer
GS
GreenIron SpitfireJun 06, 2024
Final Answer :
A
Explanation :
The firm should hire more labor because the marginal revenue product (MRP) of labor is greater than the wage rate, indicating that each additional unit of labor will add more to revenue than it costs, thus increasing profits.
Learning Objectives
- Learn the concept of marginal revenue product (MRP) and understand its importance in decisions related to hiring.
- Investigate the connection between modifications in wage rates and the decisions made by businesses regarding employment across distinct market configurations.