Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit.Assume that labor is the only input.If hiring another worker would increase output by three units per hour, then to maximize profits the firm should
A)not change the number of workers it currently hires.
B)not hire an additional worker.
C)hire another worker.
D)There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

The additional revenue from hiring another worker is $9 (3 units x $3), which is less than the $12 wage cost, so hiring another worker would decrease profits.

Suppose a Competitive Firm Is Paying a Wage of $12