A Wheat Farmer Sells Wheat in a Perfectly Competitive Market

question 173

Multiple Choice

A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market.The market price of wheat is $2 a bushel,the wage rate is $10,the farmer employs five workers,and the marginal product of the fifth worker is 10.What would you advise this farmer to do?

• A) Do nothing because the wage rate and the marginal product of the last worker hired are equal.
• B) Reduce employment because the wage paid is less than the marginal revenue product.
• C) Increase employment because the wage paid is less than the marginal revenue product.
• D) Reduce the product price so that the wage and marginal revenue product will be equal.

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