Frank's Burgers employs workers in a competitive market. It currently has 15 employees. The marginal revenue product of the 15th worker hired is $8.50 per hour. The market equilibrium wage is $10 per hour
Is this firm maximizing profit? Explain.
No, the firm is not maximizing profit. A profit-maximizing firm will add labor as long as the marginal revenue product of labor equals or exceeds the market wage. Therefore, the firm should not have hired the 15th worker.
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Which of the following is true of the dominant strategy equilibrium?
A) A dominant strategy equilibrium always leads to the best outcome for each player. B) A dominant strategy equilibrium cannot be a Nash equilibrium. C) A dominant strategy equilibrium is a Nash equilibrium if each player chooses a strategy that is a best response to the strategies of others. D) A dominant strategy equilibrium occurs if the sum of the players' payoff is zero.
A perfectly competitive firm is maximizing profits in the short run. This implies that the firm is earning the most economic profits possible, which
A) must be positive. B) must be either zero or positive. C) can be positive, negative, or zero. D) exist at the point at which price equals total cost.