A company finds that the value of marginal product for the current level of employment is $53 and the wage rate is $75.Which of the following is correct?
A) The firm is employing the profit-maximizing quantity of labor.
B) Too much labor is currently employed and the firm will lay off some workers.
C) Too few workers are currently employed and the firm will hire more workers.
D) The firm should shut down and produce nothing.
E) More information about the price of the product is needed to determine if the firm is hiring the profit-maximizing amount of labor.

Question

Quizplus · Accepted Answer

The value of marginal product ($53) is less than the wage rate ($75), indicating the firm is employing more labor than is profitable at the margin. Therefore, the firm will benefit from laying off some workers to reduce costs and increase profits.

A Company Finds That the Value of Marginal Product for the Current