Suppose a firm sells a good for a perfectly competitive price of $5.The equilibrium wage rate is $10.The first worker it hires produces five units.Two workers produce a total of nine units.Given this information, the firm will:
A)hire the first worker only.
B)hire both the first and second workers.
C)not hire either of the workers.
D)hire only the second worker.

Question

Quizplus · Accepted Answer

The marginal product of the first worker is 5 units, which is more than the price of the good ($5). Therefore, hiring the first worker would be profitable for the firm. 
The marginal product of the second worker is 4 units (9 units produced by two workers minus 5 units produced by the first worker), which is still more than the wage rate ($10). Therefore, hiring the second worker as well would also be profitable for the firm.

Suppose a Firm Sells a Good for a Perfectly Competitive