Suppose a Competitive Firm Is Paying a Wage of $12

question 250

Multiple Choice

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

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

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Definitions:

Income Statement

A financial document that summarizes a company's revenue, expenses, and profits over a specific period, usually a fiscal quarter or year.

Special Item

Unusual or infrequent gains or losses in a company’s financial statements, which are not expected to recur in the foreseeable future.

Discontinued Operations

Components of a business that have been disposed of or are classified as held for sale, and will not be continuing operations in the future.

Future Cash Flows

Estimated future financial earnings or expenses, which are used in various financial analyses to determine investment potential or project value.