A Soybean Farmer Sells Soybeans in a Perfectly Competitive Market

question 21

Multiple Choice

A soybean farmer sells soybeans in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of soybeans is $6 a bushel, the wage rate is $30, the farmer employs eight workers and the marginal product of the eighth worker is 4 bushels. 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 more 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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