Figure 18-1
On the graph, L represents the quantity of labor and Q represents the quantity of output per week.
-Refer to Figure 18-1. Suppose the firm hires each unit of labor for $600 per week, and each unit of output sells for $9. What is the value of the marginal product of the third worker?
A)$540
B)$600
C)$675
D)$810

Question

Figure 18-1
On the graph, L represents the quantity of labor and Q represents the quantity of output per week. 
-Refer to Figure 18-1. Suppose the firm hires each unit of labor for $600 per week, and each unit of output sells for $9. What is the value of the marginal product of the third worker?
A)$540 
B)$600 
C)$675 
D)$810

Quizplus · Accepted Answer

To find the marginal product of the third worker, we need to find the additional output generated when the third worker is hired. From the graph, we can see that the output when two workers are hired is 90 units per week, and the output when three workers are hired is 130 units per week. Therefore, the additional output from hiring the third worker is 130 - 90 = 40 units per week.

To find the value of the marginal product of the third worker, we need to multiply the additional output by the price of each unit of output:

Value of marginal product of the third worker = 40 units per week x $9 per unit = $360 per week

However, the firm also has to pay the third worker a wage of $600 per week, so the net value of the marginal product of the third worker is:

Net value of marginal product of the third worker = $360 per week - $600 per week = -$240 per week

Since the net value of the marginal product is negative, the firm should not hire the third worker.

Figure 18-1 on the Graph, L Represents the Quantity of Labor and Labor