The Firm Represented in the Table Below Participates in a Perfectly

question 58

Essay

The firm represented in the table below participates in a perfectly competitive market for their product as well as for labor.Complete the chart and answer the following questions. \begin{array}{|c|c|c|c|c|c|}\hline\\begin{array}{c}\text { Quantity of } \\\text { Labor }\end{array} & \begin{array}{c}\text { Total } \\\text { Output }\end{array} & \begin{array}{c}\text { Marginal } \\\text { Product of } \\\text { Labor }\end{array} & \begin{array}{c}\text { Product } \\\text { Price }\end{array} & \begin{array}{c}\text { Marginal } \\\text { Revenue } \\\text { Product of } \\\text { Labor }\end{array} & \begin{array}{c}\text { Wage Rate } \\\text { (MRC) per } \\\text { day }\end{array} \\\hline 0 & 0 & \cdots & \cdots-- & \cdots \\\hline 1 & 10 & 10 & \$ 10 & 100 & \$ 55 \\\hline 2 & 19 & & \$ & \\\hline 3 & 27 & & \$ & \\\hline 4 & 34 & & \$ & \\\hline 5 & 40 & & \$ & \\\hline 6 & 45 & & \$ & \\\hline 7 & 49 & & \$ & \\\hline 8 & 52 & & \$ & \\\hline\end{array}
a. If the firm represented in the table above is currently employing two units of labor, should they hire a third? Why or why not?
b. If the firm represented in the table above is currently employing four units of labor, should they hire a fifth? Why or why not?
c. If the firm represented in the table above is currently employing seven units of labor, should they hire an eighth? Why or why not?
d. At what level of employment will the firm be maximizing profit? If they hire one additional unit of labor, what will be the cost?

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Definitions:

Price Taker

Firm that has no influence over market price and thus takes the price as given.

Competitive Firm

A company operating in a market where it must compete with other firms for customers, often leading to innovation and efficient practices.

Market Price

The ongoing market rate for buying or selling an asset or service.

Highly Competitive

A market structure characterized by a large number of small firms, free entry and exit, and a high level of competition where no single firm can significantly influence market prices.