Which of the Following Expresses the Correct Decision-Making Rule for a Profit-Maximizing

question 11

Multiple Choice

Which of the following expresses the correct decision-making rule for a profit-maximizing firm hiring units of labor?

• A) If the MRP was rising, less labor would be employed as time passed.
• B) The firm should continue to hire workers as long as their MRP is greater than the wage rate.
• C) The firm should continue to hire workers until the total costs of all workers equals the total revenue from the output of the workers.
• D) The firm should continue to hire workers until the wage rate equals the price of the product.

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Definitions:

Call Option Contract

A financial contract that gives the holder the right, but not the obligation, to buy a stated amount of a security at a predetermined price within a specific time period.

Put Option

An agreement that grants the holder the option to sell a predetermined quantity of a basic asset at an agreed price during a defined period, without being obligated to do so.

Risk-Free Asset

An investment security that is guaranteed to return its full investment value (e.g., U.S. Treasury securities).

Market Price

The existing rate at which an asset or service can be sold or bought.