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MMLU / Consider a profit-maximizing firm in a perfectly competitive market with several…

Problem

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question

Consider a profit-maximizing firm in a perfectly competitive market with several sellers and several buyers (i.e., the firm is a "price taker" of the goods it sells and a "price taker" of the hourly wages it pays its workers). If a technological innovation made by someone in this firm were to significantly raise the firm's marginal physical product (but not that of any other firm's), then this innovation would

choices

  1. reduce the firm’s employment level, because fewer workers are now needed
  2. raise the workers’ hourly wage as they now contribute more marginal revenue
  3. lead the firm to hire more workers but not to raise their wages
  4. lead the firm to hire more workers and to pay them higher wages

subject

high_school_microeconomics

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