Suppose a firm is a price searcher in the product market and hires labor in a perfectly competitive labor market.If the wage rate is $20, the marginal product of the last worker hired is 5, and the firm is hiring the profit-maximizing amount of labor, then the marginal revenue product of the last worker hired must be
A)$1
B)$1.50
C)$4
D)$5
E)$20

Question

Quizplus · Accepted Answer

The marginal revenue product (MRP) of labor is equal to the wage rate in a perfectly competitive labor market when the firm is maximizing profit. Since the wage rate is $20, the MRP of the last worker hired must also be $20.

Suppose a Firm Is a Price Searcher in the Product