If an additional worker can produce an additional 20 units of output which can be sold for $4 per unit, what is the maximum wage that this perfectly competitive firm should pay to hire this worker?
A)$80
B)$80 minus the firm's profit markup
C)It depends on what the going wage rate is in the labor market.
D)There is insufficient information to answer the question.

Question

Quizplus · Accepted Answer

The maximum wage that the firm should pay is equal to the marginal revenue product of labor, which is the additional revenue generated by hiring one more worker. In this case, the additional revenue is $4 per unit * 20 units = $80.

If an Additional Worker Can Produce an Additional 20 Units