Table 18-1
-Refer to Table 18-1. Suppose that the firm pays its workers $80 per day. Each unit of output sells for $15. How many days of labor should the firm hire?
A)3
B)4
C)5

Question

Table 18-1 
-Refer to Table 18-1. Suppose that the firm pays its workers $80 per day. Each unit of output sells for $15. How many days of labor should the firm hire?
A)3 
B)4 
C)5

Quizplus · Accepted Answer

The firm should hire 3 days of labor. The marginal product of labor is 3 units of output per day. The value of the marginal product is 3 * $15 = $45. The cost of hiring one more day of labor is $80. So, the firm should hire labor up to the point where the value of the marginal product is equal to the cost of hiring one more day of labor. This occurs at 3 days of labor.

Table 18-1 -Refer to Table 18-1. Suppose That the Firm Pays Its