After hiring 151 units of the variable input (say labor) a firm determines the MFC to be $0.33 and the MRP to be $0.30.The firm should:
A)increase the output of its product.
B)increase the use of labor.
C)decrease the use of labor.
D)produce 151 units.
E)produce 33 units of the output.

Question

Quizplus · Accepted Answer

The firm's MFC is greater than the MRP, which means that the firm is hiring too much labor. In order to maximize profits, the firm should decrease its use of labor until the MFC and MRP are equal. Therefore, the best choice is to decrease the use of labor, which is option C.

After Hiring 151 Units of the Variable Input (Say Labor)