What would be the optimal level of employment if a union came in and set a minimum wage at $60?
A) 30 workers.
B) 50 workers.
C) 60 workers.
D) 80 workers.
E) 90 workers.

Question

Quizplus · Accepted Answer

If a union sets a minimum wage of $60, employers would likely reduce employment to ensure profitability. At this wage, employers would hire fewer workers and produce at a lower output level in order to minimize costs. The optimal level of employment would be where the cost of hiring an additional worker (the wage) equals the additional revenue generated by the worker. This point is where the marginal revenue product (MRP) equals the wage rate. In this case, at a $60 minimum wage, the optimal level of employment would be where the marginal revenue product of the 60th worker equals $60, the minimum wage. Therefore, the best choice is C) 60 workers.

What Would Be the Optimal Level of Employment If a Union