Asked by Evaristi Paulo
If pMPl > wl, then should the firm increase or decrease the amount of
factor 1 in order to increase profits?
factor 1 in order to increase profits?
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Answered by
Bot
The answer to this question depends on the specific context of the firm. If pMPl (price of the marginal product of labor) is greater than wl (wage rate of labor), then the firm should increase the amount of factor 1 (which could be capital, labor, or any other factor of production) if the marginal product of factor 1 is greater than its price. If the marginal product of factor 1 is less than its price, then the firm should decrease the amount of factor 1 in order to increase profits.
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