Assume that a firm produces output using one fixed input, capital, and one variable input, labor. The firm can sell all of the output it produces at a market price of $3 each, can hire all of the workers it wants at a market wage rate $11 each, and has fixed costs of $10. It faces the following production schedule.

Number of employee / Total output

0 0

1 14

2 26

3 35

4 42

5 46

6 48

In what kind of market structure does this firm sell its output? How can you tell?

1. In what kind of market structure does this firm hire its employees? How can you tell?
2. Using marginal revenue product analysis, how many employees should this firm hire to maximize short-run profits? How can you determine that?
3. Based on your answer in part (c), how many units of output will this firm produce?
4. At the level of output you identified in part (d), is the firm earning an economic profit, a normal profit, or suffering a loss? How can you tell?