Question
If a competitive firm producing a good using labour has a short-run production function with decreasing Marginal Productivity of Labour (MPL) and is at a
If a competitive firm producing a good using labour has a short-run production function with decreasing Marginal Productivity of Labour (MPL) and is at a point where MPL is greater than the relative price of labour, then:
(a) Its profits would be higher if it decreased the amount of labour used.
b) Its profits would be higher if it increased the amount of labour used
c) He would be maximising his profit
(d) He would be making as little profit as possible.
Note: explain which alternative is correct as well as explain why the other alternatives are false or uncertain.
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