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:

Security's Beta

A measure of a security's volatility in relation to the overall market, indicating the risk associated with the investment.

Security Market Line

A graphical representation that shows the expected return of an asset at different levels of systematic, or market, risk.

Market Rate

The current interest rate available in the marketplace for securities or loans.

Risk-free Rate

A theoretical return on an investment with zero risk, typically represented by government bonds.