Use the table to answer the following question.

If the market wage rate is $130 per week,how many workers should be employed if the firm wants to maximize profit?
A)3
B)4
C)5
D)6 or more

Question

Use the table to answer the following question.

If the market wage rate is $130 per week,how many workers should be employed if the firm wants to maximize profit?
A)3 
B)4 
C)5 
D)6 or more

Quizplus · Accepted Answer

To maximize profit, the firm should hire workers until the marginal revenue product (MRP) of the last worker equals the wage rate. At $130 per week, the MRP of the fifth worker is $130, which is equal to the wage rate. Therefore, the firm should employ five workers to maximize profit. Hiring more workers would result in a negative marginal profit and reduce the overall profit of the firm.

Use the Table to Answer the Following Question