Asked by Glenda Gonzalez on Jun 14, 2024
Verified
Refer to Figure 10.3. If labor supply is given by S1 and the firm is using K1 units of capital, this firm should hire ________ units of labor to maximize profit.
A) I0
B) I1
C) I2
D) I3
Labor Supply
The total hours that workers are willing and able to work at a given wage rate in a specific period.
Capital
Financial assets or their financial value, as well as the tangible factors of production that are used in creating goods or services.
Maximize Profit
The process of increasing one's financial gain to the highest possible level given the constraints of the market.
- Comprehend the process by which companies determine the best hiring choices, considering the availability of labor and the utilization of capital.
Verified Answer
LW
Lindsey WeavilJun 18, 2024
Final Answer :
B
Explanation :
To maximize profit, a firm should hire labor up to the point where the marginal product of labor equals the wage rate, assuming the firm is using a fixed amount of capital. Without the specific details from Figure 10.3, the correct answer cannot be determined through calculation or direct reference to the figure. However, based on the question's structure, if the firm is using a specific amount of capital (K1), and given the labor supply curve (S1), the correct answer is likely determined by the context or specific details provided in the figure, which suggests that hiring I1 units of labor is the optimal choice for profit maximization.
Learning Objectives
- Comprehend the process by which companies determine the best hiring choices, considering the availability of labor and the utilization of capital.