Ernie's Sushi-On-A-Stick Is a Perfectly Competitive Firm Currently Employing 75

question 74

Multiple Choice

Ernie's Sushi-On-A-Stick is a perfectly competitive firm currently employing 75 workers. The marginal revenue product of the 75th worker is $9.00 per hour. The wage rate is $12.00 per hour. To increase profits, this firm should

• A) decrease employment until the MRP of labor equals $12.00.
• B) increase employment until the MRP of labor equals $12.00.
• C) continue hiring 75 workers because the firm earns a surplus of $3.00 on each worker hired.
• D) increase the price of sushi-on-a-stick so that the marginal revenue product increases to $12.00 per hour.

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Definitions:

Warranty Expense

The estimated cost associated with the repair, replacement, or refund of products under warranty, recognized as a liability by a company.

Estimated Warranty Liability

A provision in financial accounting for the estimated cost of warranty claims that are expected but have not yet occurred.

Warranty Replacement

The process of replacing or repairing a product under the terms of a warranty agreement due to defects or failures.

Merchandise

Goods that are purchased for the purpose of being sold to customers in the retail environment.