A Competitive Employer Is Using Labor in Such an Amount

question 205

Multiple Choice

A competitive employer is using labor in such an amount that labor's MRP is $10 and its wage rate is $8. This firm

• A) should hire more labor because this will increase profits.
• B) should hire more labor, although this may either increase or decrease profits.
• C) is currently hiring the profit-maximizing amount of labor.
• D) is selling its product in an imperfectly competitive market.

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Definitions:

Rent

Payment made periodically by a tenant to a landlord in exchange for the use of land, a building, or another property.

MRP

The additional revenue produced by increasing one unit of a production input, emphasizing the productivity aspect in revenue generation.

Factor of Production

Resources used in the creation of goods or services, commonly categorized into land, labor, capital, and entrepreneurship.

Wage Rate

Remuneration paid by employers to employees for their labor, calculated on an hourly or annual basis, a key factor in employment decisions.