A monopolist is currently hiring 5,000 units of labor. At this level, the marginal revenue of output is $10, the (fixed) wage rate is $300, and the marginal product of labor is 50. In order to maximize profit, the firm should:

1. Keep the level of employment the same because the firm is earning a profit of $100,000.

2. Hire more labor because the next unit of labor increases profit by $500.

3. Hire more labor because the next unit of labor increases profit by $200.

4. Hire less labor because the last unit of labor added more to total cost ($300) than to total revenue ($10).

Answer rating: 100% (QA)

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