The table below shows the total output produced by different units of a resource. Assume that the resource and output markets are both perfectly competitive. The equilibrium price of the resource is $15.00, and the equilibrium price of the product is $0.50.Table 14.2
Marginal revenue product (MRP) of a resource is the product of the marginal product of the resource and the marginal revenue.
-If a firm hires its fourth worker for $5 and its fifth worker for $8, then
A)the firm is a monopolist.
B)the firm must be substituting capital for labor.
C)the fifth worker must have been less productive than the fourth.
D)the firm is not maximizing its profit.
E)the labor market is not perfectly competitive.

Question

The table below shows the total output produced by different units of a resource. Assume that the resource and output markets are both perfectly competitive. The equilibrium price of the resource is $15.00, and the equilibrium price of the product is $0.50.Table 14.2
Marginal revenue product (MRP) of a resource is the product of the marginal product of the resource and the marginal revenue. 
-If a firm hires its fourth worker for $5 and its fifth worker for $8, then
A)the firm is a monopolist. 
B)the firm must be substituting capital for labor. 
C)the fifth worker must have been less productive than the fourth. 
D)the firm is not maximizing its profit. 
E)the labor market is not perfectly competitive.

Quizplus · Accepted Answer

The increase in wage from the fourth to the fifth worker suggests that the firm is paying more to attract additional labor, which is indicative of a labor market that is not perfectly competitive. In a perfectly competitive labor market, all workers with similar skills would be paid the same wage.

The Table Below Shows the Total Output Produced by Different