A worker can always build a chair in four hours.If a chair sells for $40 in a perfectly competitive market, then the equilibrium wage per hour in a perfectly competitive labor market is
A)$4.
B)$10.
C)$40.
D)$160.

Question

Quizplus · Accepted Answer

In a perfectly competitive labor market, the wage rate is equal to the marginal product of labor (MPL). Here, the MPL is the additional output produced by one extra hour of labor, which is equal to the inverse of the time needed to produce a chair. So, MPL = 1/4 chairs per hour. 
Since the equilibrium wage is equal to MPL times the price of a chair, we have: 
Equilibrium wage = MPL * Price = (1/4)*$40 = $10. 
Therefore, the correct answer is (B).

A Worker Can Always Build a Chair in Four Hours