A small bakery is considering hiring an additional baker to increase production. Currently, the marginal product of labor is 15 loaves of bread per hour, while the baker's wage is $12 per hour. The bakery also plans to invest in a new oven that costs $1,200 and is expected to increase production by 100 loaves per day. If the marginal product of capital from the new oven is 50 loaves per day, should the bakery proceed with both the hiring of the new baker and the purchase of the oven based on the principles of resource allocation for profit maximization?

To determine if the bakery should hire an additional baker and buy a new oven, we need to look at the benefits compared to the costs. The current baker produces 15 loaves per hour, which means hiring another baker at $12 an hour is worth it since they can produce more bread than the cost of their wage. For the new oven, it costs $1,200 but will produce an extra 100 loaves per day, making it a good investment since the marginal product of capital is 50 loaves per day. Since the income from the additional loaves should exceed the costs of both the new baker and the oven, it makes sense for the bakery to proceed with both decisions. This way, the bakery maximizes its production and potential profits.