6. If pMPl > wl, then should the firm increase or decrease the amount of
factor 1 in order to increase profits?
1 answer
The firm should increase the amount of factor 1 in order to increase profits. This is because when pMPl > wl, the marginal product of factor 1 is greater than the wage rate of factor 1, meaning that the firm can increase profits by increasing the amount of factor 1.
1 answer