Suppose a Competitive Firm Is Paying a Wage of $12

question 196

Multiple Choice

Suppose a competitive firm is paying a wage of $12 an hour.Assume that labour is the only input.If hiring another worker would increase output by four units per hour, then to maximise profits the firm should

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

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Definitions:

Applied Manufacturing Overhead

The allocation of manufacturing overhead costs to individual units of production based on a formula or rate.

Cost Of Goods Manufactured

The total expense incurred by a company to produce goods in a given period, including materials, labor, and overhead costs.

Direct Materials

Raw materials that can be directly attributed to the production of goods, visually identifiable in the final product.

Direct Labor

The wages and associated costs of employees who are directly involved in the production of goods or services.