Consider labour that is hired for $18 per hour. If the last hour of labour hired produces 8 units of output which sells for $10 per unit, that labour- hour adds _ to the firm's profit and so
Labour should be hired.
A) $62; more
B) $64; more
C) $62; less
D) $0; no
E) - $64; less

Question

Quizplus · Accepted Answer

The last hour of labour hired produced 8 units of output, which sold for $10 per unit. So, the total revenue generated from this hour of labour is $80 (8 units x $10 per unit). The cost of this labour hour is $18.

Therefore, the marginal profit from this hour of labour is $80 - $18 = $62.

Since the marginal profit is positive, the firm should hire more labour. Option A is the correct choice because it reflects the marginal profit earned from the last hour of labour hired.

Consider Labour That Is Hired for $18 Per Hour