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 maximise profits the firm should
A)not change the number of workers it currently hires.
B)lay off some of its workers.
C)hire the additional worker.
D)There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

The additional worker will increase output by 5 units per hour. Since the firm sells its product at $3 per unit, the additional output would increase revenue by $15 per hour. 
The wage paid to the worker is $12 per hour, which is less than the increase in revenue. 
Therefore, hiring the additional worker would generate a net benefit for the firm, leading to an increase in profits.

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