A local bakery is considering hiring an additional baker to increase production. Currently, the marginal product of labor is 20 loaves of bread per day, and the wage for the new baker is $100 per day. If the marginal cost of producing each loaf of bread is $5, what should the bakery do regarding the hiring decision?

The bakery should consider the additional value that the new baker would bring compared to the cost of hiring them. Currently, the new baker can produce 20 loaves of bread each day, and if the bakery sells each loaf for more than $5, it would be profitable to hire them. Since the wage for the new baker is $100 per day, the bakery would spend $100 to produce 20 loaves, making the cost per loaf $5. If they can sell these loaves for more than $5 each, they will earn more than they spend, making hiring the new baker a good decision. Therefore, if the selling price of the bread is higher than $5, the bakery should go ahead and hire the additional baker.