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 sells its output for $10 per unit, and it pays each of its workers $400 per week. When the number of workers increases from 4 to 5, the
A)marginal revenue is $450 per unit of output, and the marginal cost is $400 per unit of output.
B)value of the marginal product of labor is $3,900, and the marginal cost per unit of output is $400.
C)value of the marginal product of labor is $450, and the marginal cost per unit of output is about $8.89.
D)firm's profit increases.

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 sells its output for $10 per unit, and it pays each of its workers $400 per week. When the number of workers increases from 4 to 5, the
A)marginal revenue is $450 per unit of output, and the marginal cost is $400 per unit of output. 
B)value of the marginal product of labor is $3,900, and the marginal cost per unit of output is $400. 
C)value of the marginal product of labor is $450, and the marginal cost per unit of output is about $8.89. 
D)firm's profit increases.

Quizplus · Accepted Answer

To calculate the value of the marginal product of labor (VMPL), we need to find the change in output resulting from an increase in one unit of labor. In this case, when the number of workers increases from 4 to 5, the change in output is from 25 units to 30 units, which is an increase of 5 units.

VMPL = (change in output) x (price per unit) = 5 x $10 = $50

The marginal cost of labor (MC) is the additional cost of hiring one more worker, which in this case is the weekly wage of $400.

Therefore, the answer is C - the value of the marginal product of labor is $450 ($50 x 9 units of labor) and the marginal cost per unit of output is about $8.89 ($400/45 units of output). This means that the firm should hire the fifth worker, as their VMPL ($50) is greater than their MC ($8.89), resulting in an increase in profit.

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