How Much Labor Should The Firm Employ

How much labor should the firm employ and what is the resulting output and profit?In any firm, the amount of labor that should be employed depends on a variety of factors. The most important factor is usually the level of production that the firm is trying to achieve. If a firm is trying to produce a lot of output, then it will need to employ more labor. On the other hand, if a firm is only trying to produce a small amount of output, then it will only need to employ a small amount of labor.

In addition to the level of production that the firm is trying to achieve, the amount of labor that should be employed also depends on the level of technology that the firm is using (Krasna et al., 2021). If a firm is using very sophisticated technology, then it will not need to employ as much labor as a firm that is using less sophisticated technology.

Another factor that affects the amount of labor that should be employed is the availability of workers. If there are few workers available, then a firm will need to employ more labor to achieve its desired level of production. On the other hand, if there are many workers available, then a firm will not need to employ as much labor.

Finally, the amount of labor that should be employed also depends on the wages that workers are paid. If workers are paid high wages, then a firm will need to employ more labor to achieve its desired level of production. On the other hand, if workers are paid low wages, then a firm will not need to employ as much labor.

            On the other hand, perfectly competitive firms have only one main decision to make in their operations. This decision involves what quantity to produce. The best way to understand this concept is to consider a different way of defining profit. Notably, according to Akinleye et al. (2019), profit can be described as the total revenue minus total costs. However, it is important to consider the fact that in perfectly competitive firms, prices are determined by the forces of demand and supply. Therefore, when these firms decide on the quantity of produce they can produce, then the quantity together with the prices that are prevailing in the market for outputs and inputs will determine the total revenue of the firm, total costs, and the ultimate level of profit. As long as the perfectly competitive firm accepts the price prevailing in the market, it can sell as large quantities as possible. It is also essential to note that total revenue can increase as the firms increase the quantity sold. Also, if the price of every unit sold increases, then the total revenue also increases. The other essential point to note regarding the profit calculation of a perfectly competitive firm is that this type of firm face perfectly elastic demand curve for the products that it produces. That simply means that buyers are always willing to buy any quantity of products from the firm at the prevailing market price.  

In conclusion, the amount of labor that should be employed in any firm depends on a variety of factors. The most important factor is usually the level of production that the firm is trying to achieve. In addition, the amount of labor that should be employed also depends on the level of technology that the firm is using, the availability of workers, and the wages that workers are paid.

References

Akinleye, D. D., McNutt, L. A., Lazariu, V., & McLaughlin, C. C. (2019). Correlation between hospital finances and quality and safety of patient care. PloS One, 14(8), e0219124. https://doi.org/10.1371/journal.pone.0219124

Krasna, H., Czabanowska, K., Beck, A., Cushman, L. F., & Leider, J. P. (2021). Labour market competition for public health graduates in the United States: A comparison of workforce taxonomies with job postings before and during the COVID-19 pandemic. The International Journal of Health Planning and Management, 36(S1), 151–167. https://doi.org/10.1002/hpm.3128

Leave a Reply