Assume That the Going Wage for a Worker at a Competitive

question 295

Multiple Choice

Assume that the going wage for a worker at a competitive firm is $50 a day. If the marginal revenue product for the sixth worker is $55 a day, the

• A) sixth worker should be hired.
• B) firm is maximizing its profits.
• C) firm should hire fewer than six workers.
• D) competitive firm can change the wage rate.

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Definitions:

Project's Fixed Assets

Project's fixed assets refer to the long-term tangible assets that are used in the operation of a project and are not expected to be converted into cash in the short term.

Required Return

The minimum profit or yield that investors expect or require from an investment to make it worthwhile.

Net Present Value

An economic measure that determines the disparity between the current value of cash coming in and the current value of cash going out over a specific timeframe.

Internal Rate Of Return

The break-even discount rate at which a project's cash flows net present value is zero.