Exhibit 13-1
-Refer to Exhibit 13-1. Suppose the profit-maximizing, competitive firm hires five workers and the output price is $15. Then the wage per week must be

Question

Exhibit 13-1 
-Refer to Exhibit 13-1. Suppose the profit-maximizing, competitive firm hires five workers and the output price is $15. Then the wage per week must be

Quizplus · Accepted Answer

The profit-maximizing condition for a competitive firm is to hire workers up to the point where the value of the marginal product (VMP) of labor equals the wage rate. VMP is calculated as the marginal product (MP) of labor times the output price. Without the exhibit, we can infer that if the firm hires five workers, the VMP of the fifth worker must be equal to or less than the wage if the output price is $15. Since the wage must be less than or equal to the VMP of the fifth worker for the firm to hire them, and given the options, the wage must be less than or equal to $180 but greater than $135 to make hiring the fifth worker profitable at an output price of $15.

Exhibit 13-1 -Refer to Exhibit 13-1. Suppose the Profit-Maximizing, Competitive Firm Hires