Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit.Assume that labour is the only input.If the last worker hired produces four units of output per hour, then to maximise profits the firm should
A)not change the number of workers it currently hires.
B)lay off some workers.
C)hire another worker.
D)There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

The firm's marginal cost of hiring the last worker is $12 (the wage), and the marginal revenue product of this worker is $12 (4 units of output per hour times $3 per unit). Since the marginal cost equals the marginal revenue product, the firm is maximizing profits and should not change the number of workers it currently hires.

Suppose a Competitive Firm Is Paying a Wage of $12