José,a corn farmer operating in a perfectly competitive market,pays his workers $8 an hour.At his current level of labor use,the marginal product of an additional hour of labor is three bushels of corn.The market price of corn is $2.75.To maximize his profits,Jose should:
A)hire more labor.
B)hire less labor.
C)not change the amount of labor.
D)This question cannot be answered without knowing the average product of labor.

Question

Quizplus · Accepted Answer

Since the marginal product of a worker is greater than the wage paid ($8), it is profitable for Jose to hire additional workers. Each additional hour of labor will produce an additional three bushels of corn, which can be sold at the market price of $2.75 per bushel. This means that the additional revenue generated from each hour of labor ($8.25) is greater than the cost of hiring the worker ($8). Therefore, it is in Jose's best interest to hire more labor to increase his profits.

José,a Corn Farmer Operating in a Perfectly Competitive Market,pays His