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A profit-maximizing firm hires labor in a perfectly competitive market. Labor is the only variable input, and the marginal product of the last worker hired is 10 units per hour. If the hourly wage is $20, the firm's marginal revenue:_______

a. increases first and then decreases as more output is produced
b. is $20
c. increases as more output is produced
d. is $2
e. decreases first and then increases as more output is produced

Sagot :

Answer:

b

Explanation:

A perfect competition is characterized by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry.  

In the long run, firms earn zero economic profit.  If in the short run firms are earning economic profit, in the long run firms would enter into the industry. This would drive economic profit to zero.  

Also, if in the short run, firms are earning economic loss, in the long run, firms would exit the industry until economic profit falls to zero.  

Parrain

As a result of this being a perfectly competitive market, the marginal revenue a. increases first and then decreases as more output is produced.

Marginal Revenue

  • This is the incremental revenue made as more units of production are employed.
  • Increases at first but then decreases as a result of the Law of Diminishing Returns.

The marginal revenue of the company will rise at first as more labor is hired because they will produce more. As time goes by however, this marginal revenue will drop as marginal cost rises.

In conclusion, option A is correct.

Find out more on the Law of Diminishing Returns at https://brainly.com/question/694741.

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