If the MPP of an additional unit of labor is 4 units per hour,product price is constant at $5 per unit,and the wage rate is $19 per hour,then
A)The additional unit of labor should be employed.
B)The additional unit of labor should not be employed because it costs more than it is worth.
C)The employer should lower wages and accept less employment of labor.
D)Product price must be reduced if profits are to be made.

Question

Quizplus · Accepted Answer

Since the Marginal Product of Labor (MPP) is greater than the wage rate, the employer should hire an additional unit of labor to increase production and thus increase profit. The product price being constant at $5 per unit does not affect the decision to hire the additional unit of labor.

If the MPP of an Additional Unit of Labor Is