Paper Pushers Inc. hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company's hourly output varies with the number of workers hired, as shown in the table below. If each page sells for $2 and the market wage is $15 per hour, then this firm will hire ______ workers per hour.

Question

Paper Pushers Inc. hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company's hourly output varies with the number of workers hired, as shown in the table below.  If each page sells for $2 and the market wage is $15 per hour, then this firm will hire ______ workers per hour.

Quizplus · Accepted Answer

To determine the optimal number of workers to hire, the firm should continue to hire additional workers as long as the marginal revenue product (MRP) of each additional worker exceeds the market wage rate. From the table, we can see that the MRP of the fifth worker is $30 per hour (15 pages per hour at $2 per page), which is equal to the market wage rate. Any additional workers would have an MRP lower than the market wage rate, so the firm should stop hiring at this point. Therefore, the firm will hire 6 workers per hour to maximize profit.