The Last Worker Hired at a Competitive Firm Has a Value

question 23

Multiple Choice

The last worker hired at a competitive firm has a value of marginal product of $17 and he is paid the market wage of $15.The firm could __________ by __________.

• A) reduce losses;hiring fewer workers
• B) increase profit;hiring more workers
• C) reduce losses;hiring more workers
• D) increase profit;hiring fewer workers
• E) maximize profit;hiring more workers

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Definitions:

Price Wars

A competitive strategy involving companies lowering prices to undercut competitors, often leading to a situation where prices continue to drop.

Profitability

A measure of the efficiency and financial performance of a company, often assessed by the ratio of its profits to its revenues.

Generic Strategy

A fundamental strategy a company can adopt to achieve a competitive advantage, typically categorized as cost leadership, differentiation, or focus.

Competitive Pricing

A pricing strategy where a company sets its product prices based on the prices of competitors, aiming to offer more value or lower costs.