Suppose a competitive firm pays a wage of $12 an hour and sells its product at $3 per unit.Assume that labour is the only input.If hiring another worker would increase output by five units per hour, then to maximize profits the firm should

Question

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Hiring the additional worker would increase the firm's output by five units per hour. The additional revenue generated by selling these five units at $3 each would be $15. The cost of paying the worker $12 for an hour of work would be less than the additional revenue generated, resulting in an increase in profits. Therefore, hiring the additional worker would be the most profitable choice for the firm.

Suppose a Competitive Firm Pays a Wage of $12 an Hour