Use the table to answer the following question.
If the market wage rate is $130 per week, how many workers should be employed if the firm wants to maximize profit?
A) 3
B) 4
C) 5
D) 6 or more

Question

Use the table to answer the following question.
 If the market wage rate is $130 per week, how many workers should be employed if the firm wants to maximize profit?
A) 3 
B) 4 
C) 5 
D) 6 or more

Quizplus · Accepted Answer

To maximize profit, the firm will choose to employ workers until the marginal revenue product (MRP) of labor equals the wage rate. In this case, at a wage rate of $130, the MRP of the fifth worker is $128, which is less than the wage rate. Therefore, the firm should stop hiring at four workers, where the MRP of the fourth worker is $136, which is greater than the wage rate. Therefore, the best choice is to employ 4 workers (Choice B).

Use the Table to Answer the Following Question