Suppose a Competitive Firm Is Paying a Wage of $12

question 55

Multiple Choice

Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit.Assume that labour is the only input.If the last worker hired produces four units of output per hour, then to maximise profits the firm should

• A)not change the number of workers it currently hires.
• B)lay off some workers.
• C)hire another worker.
• D)There is not enough information to answer the question.

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Definitions:

Tax Rate

The percentage rate at which an individual or corporation is taxed.

Gross Profit

The difference between revenue and the cost of goods sold before administrative and other expenses are deducted.

Commercial Substance

An occurrence in a transaction that causes a significant change in cash flow, indicating that the transaction has economic consequences.

Net Income

The company's earnings post all deductions, including expenses and taxes, from its overall revenues.