Use the following to answer questions 30-34:
Figure 13.4
-(Figure 13.4) A price taker will choose to employ _____ workers.
A) 60
B) 50
C) 40
D) 25

Question

Use the following to answer questions 30-34:
Figure 13.4 
-(Figure 13.4) A price taker will choose to employ _____ workers.
A) 60 
B) 50 
C) 40 
D) 25

Quizplus · Accepted Answer

A price taker faces a perfectly elastic supply curve of labor, hence can hire all the workers he wants at the going market wage rate. In this case, the market wage rate is $8/hour, and the firm will choose to employ the quantity of labor at which the value of the marginal product of labor equals the wage rate. In panel (b) of Figure 13.4, we can see that at a quantity of 40 workers, the value of the marginal product of labor curve intersects the $8/hour wage rate. At this quantity, the firm's total revenue from output is maximized. Thus, the firm should employ 40 workers to maximize its profits.

Use the Following to Answer Questions 30-34