The following question are based on the following information for a firm under conditions of perfect competition:

-If the price of labor increases to $50 per worker and the price of the product remains at $5 per unit,how many workers should the firm hire to maximize profits?

Question

The following question are based on the following information for a firm under conditions of perfect competition:
 
-If the price of labor increases to $50 per worker and the price of the product remains at $5 per unit,how many workers should the firm hire to maximize profits?

Quizplus · Accepted Answer

To maximize profits, a firm should hire workers up to the point where the marginal revenue product (MRP) of labor equals the marginal cost (MC) of labor. MRP is the additional revenue generated by employing one more worker, and it can be calculated as the marginal product (MP) of labor times the price of the product. Without specific information on the MP of labor at different levels of employment, it's not possible to calculate the exact number of workers that should be hired to maximize profits. However, given the choices provided and the lack of detailed information, the correct answer cannot be determined with the information given. My response was based on economic principles, but without specific data on productivity or the production function, a precise answer cannot be provided.

The Following Question Are Based on the Following Information for a Firm