Table 18-1

$$\begin{array} { | c | c | }
\hline \begin{array} { c }
\text { Labor } \
\text { (Number of workers) }
\end{array} & \begin{array} { c }
\text { Output } \
\text { (Units per day) }
\end{array} \
\hline 0 & 0 \
\hline 1 & 14 \
\hline 2 & 23 \
\hline 3 & 30 \
\hline 4 & 34 \
\hline 5 & 36 \
\hline 6 & 37 \
\hline
\end{array}$$
-Refer to Table 18-1. Suppose that the firm pays its workers $29 per day. Each unit of output sells for $11. How many workers should the firm hire?
A)5
B)2
C)3
D)4

Question

Table 18-1
​
​
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Labor } \
\text { (Number of workers) }
\end{array} & \begin{array} { c } 
\text { Output } \
\text { (Units per day) }
\end{array} \
\hline 0 & 0 \
\hline 1 & 14 \
\hline 2 & 23 \
\hline 3 & 30 \
\hline 4 & 34 \
\hline 5 & 36 \
\hline 6 & 37 \
\hline
\end{array}$$
-Refer to Table 18-1. Suppose that the firm pays its workers $29 per day. Each unit of output sells for $11. How many workers should the firm hire?
A)5
B)2
C)3
D)4

Quizplus · Accepted Answer

The firm should hire workers as long as the revenue generated by the additional worker is greater than or equal to the cost of hiring that worker. The marginal product of labor (additional output produced by an additional worker) decreases as more workers are hired, indicating diminishing returns. To find the optimal number of workers, calculate the marginal revenue product (MRP = marginal product of labor * price of output) for each worker and compare it to the wage ($29).- 1st worker: MRP = (14 - 0) * $11 = $154- 2nd worker: MRP = (23 - 14) * $11 = $99- 3rd worker: MRP = (30 - 23) * $11 = $77- 4th worker: MRP = (34 - 30) * $11 = $44- 5th worker: MRP = (36 - 34) * $11 = $22- 6th worker: MRP = (37 - 36) * $11 = $11The 4th worker's MRP ($44) is the last one that exceeds the wage of $29. Therefore, the firm should hire 4 workers.

Table 18-1 ​ ​ -Refer to Table 18-1

Table 18-1

-Refer to Table 18-1