The following table shows output per hour produced by the different units of labor. Table 14.1
The marginal revenue product of a resource is equal to the product of the marginal product of an input and marginal revenue.
According to Table 14.1,if the wage rate is $6 per hour,how many workers should this firm hire?
A)3
B)2
C)4
D)5

Question

The following table shows output per hour produced by the different units of labor. Table 14.1
 The marginal revenue product of a resource is equal to the product of the marginal product of an input and marginal revenue.
According to Table 14.1,if the wage rate is $6 per hour,how many workers should this firm hire?
A)3 
B)2 
C)4 
D)5

Quizplus · Accepted Answer

To determine how many workers the firm should hire, we need to calculate the marginal revenue product (MRP) for each worker. MRP = Marginal Product of Labor x Marginal Revenue.

The first worker has an MRP of $30 ($15 x $2), the second worker has an MRP of $24 ($12 x $2), the third worker has an MRP of $18 ($9 x $2), and the fourth worker has an MRP of $12 ($6 x $2).

Hiring a fifth worker would result in an MRP of only $6 ($3 x $2), which is less than the $6 wage rate. Therefore, the firm should hire four workers, since their combined MRP is $84 ($30 + $24 + $18 + $12), which is greater than the total wage cost of $24 ($6 x 4).

The Following Table Shows Output Per Hour Produced by the Different