Question

A firm determines that it can hire one more worker at a wage of $80 per day, and its MRP would increase by $100 for the day. The firm also determines that it can rent one more piece of capital equipment at a cost of $200 per day, and its MRP would increase by $250 for the day. In order to maximize profit, the firm should

a. hire one more worker but not rent a piece of equipment
b. hire one more worker and also rent a piece of equipment
c. reduce the number of workers and rent more equipment
d. rent one piece of equipment but not hire a worker
e. reduce the amount of equipment and hire more workers

Answer 1

d. rent one piece of equipment but not hire a worker.

Step-by-step explanation:

when firm rents the equipment then the MRP is "250" which is higher than hiring one more worker, Therefore, the firm only rent one equipment will not hire any worker.