If the marginal revenue product of the fifth worker is $15, the price of the last unit of output produced is $5, and the firm sells as a price searcher, then the marginal product of the fifth worker is
A)3 units of output
B)45 units of output
C)fewer than 3 units of output
D)greater than 3 units of output
E)greater than 75 units of output

Question

Quizplus · Accepted Answer

We know that in a price searching firm, marginal revenue product (MRP) equals the price of the last unit of output (P) times the marginal product (MP) of the worker. In this case, MRP of the fifth worker is $15 and P is $5. Thus,

$15 = $5 x MP
MP = 3

Therefore, the marginal product of the fifth worker is 3 units of output. However, the question asks for the marginal product, not the marginal product of the fifth worker. We don't have enough information to determine the marginal product of any particular worker beyond the fifth worker, so we cannot determine if the marginal product is fewer than, equal to, or greater than 3 units of output. Therefore, the correct answer is D, greater than 3 units of output.

If the Marginal Revenue Product of the Fifth Worker Is