Use the following to answer question:
-(Table: Value of the Marginal Product of Labor and Demand)Use Table: Value of the Marginal Product of Labor and Demand.In the table,the total product of labor is shown for the hourly production of power cords.Assume that the market for power cords is perfectly competitive.The price of a power cord is $2,the market wage rate is $40 per hour,and 4 workers are hired.Profit can be maximized by hiring _____ worker(s).
A)1 more
B)2 more
C)1 fewer
D)2 fewer

Question

Use the following to answer question: 
-(Table: Value of the Marginal Product of Labor and Demand)Use Table: Value of the Marginal Product of Labor and Demand.In the table,the total product of labor is shown for the hourly production of power cords.Assume that the market for power cords is perfectly competitive.The price of a power cord is $2,the market wage rate is $40 per hour,and 4 workers are hired.Profit can be maximized by hiring _____ worker(s).
A)1 more 
B)2 more 
C)1 fewer 
D)2 fewer

Quizplus · Accepted Answer

To maximize profit, a firm in a perfectly competitive market hires workers up to the point where the value of the marginal product of labor (VMPL) equals the wage rate. VMPL is calculated as the marginal product of labor (the additional output produced by an additional worker) multiplied by the price of the product. Without the specific numbers from the table, the general principle is that if hiring 4 workers results in a VMPL higher than $40, the firm can increase profit by hiring more workers until VMPL equals the wage rate. Since the correct answer is to hire 1 more worker, it implies that the VMPL for the 5th worker is at least $40, matching the wage rate, thus maximizing profit.

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