Use the following to answer questions:
Scenario: The Decision to Hire Labor
Assume that both the product market and the labor market are perfectly competitive. The price of this firm's product is $5. The firm's total product with respect to labor is given in the table that follows.
-(Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire Labor. If this profit-maximizing firm hires two workers, what is a possible equilibrium wage rate in the labor market?
A) $30
B) $5
C) $13
D) $6

Question

Use the following to answer questions:
Scenario: The Decision to Hire Labor
Assume that both the product market and the labor market are perfectly competitive. The price of this firm's product is $5. The firm's total product with respect to labor is given in the table that follows. 
-(Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire Labor. If this profit-maximizing firm hires two workers, what is a possible equilibrium wage rate in the labor market?
A) $30 
B) $5 
C) $13 
D) $6

Quizplus · Accepted Answer

The equilibrium wage rate is the wage rate that equates the quantity of labor demanded by the firm with the quantity of labor supplied by the workers. In this case, the firm is profit-maximizing, so it will hire workers up to the point where the marginal revenue product of labor (MRPL) is equal to the wage rate. The MRPL is the additional revenue that the firm earns by hiring one more worker. In this case, the MRPL is $30. Therefore, the equilibrium wage rate is $30.

Use the Following to Answer Questions