A Soybean Farmer Sells Soybeans in a Perfectly Competitive Market

question 176

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 $10 a bushel, the wage rate is $15, the farmer employs eleven workers and the marginal product of the eleventh worker is 18. 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 greater 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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Definitions:

Norms Enforced

The process by which social norms or expectations are upheld and followed within a society or group.

Moral Holiday

A specified time period during which some norm violations are allowed.

Negative Sanctions

Penalties or punishments imposed on individuals or groups to discourage nonconformity to societal norms or laws, ranging from informal disapproval to formal legal penalties.

Gesturing

The use of physical movements and signs, often made with the hands or body, to convey messages or express thoughts without using words.