A firm in a competitive industry faces a market price for output of $25 and a wage rate of $750. At the current level of employment (50 units of labor), the marginal product of labor is 20. In order to maximize profit, the firm should
A. keep the level of employment the same because the firm is earning a profit of $500.
B. hire less labor because the firm is suffering a loss of $12,500.
C. hire more labor because hiring another unit of labor would increase profit by $500.
D. hire less labor because hiring the last unit of labor decreased profit by 250.
Answer: D
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