Columns 1 and 2 make up a portion of a monopolist's production function for a single variable input,labor.Columns 2 and 3 represent the demand function facing the monopolist over this range of output: $\begin{array}{c}
\begin{array}{c}
(1)\
\text {Units of Labor}\
3 \
4 \
5 \
6 \
7
\end{array}
\begin{array}{c}
(2)\
\text {Units of Output}\
370 \
490 \
570 \
600\
620
\end{array}
\begin{array}{c}
(3)\
\text {Price}\
\$10\
9\
8\
7\
6
\end{array}
\end{array}$
If an increase in consumers' income increases product price by $2 at each level of output,how many units of labor will the firm employ at a wage rate of $300?

Question

Columns 1 and 2 make up a portion of a monopolist's production function for a single variable input,labor.Columns 2 and 3 represent the demand function facing the monopolist over this range of output: $\begin{array}{c}
\begin{array}{c}
(1)\
\text {Units of Labor}\
3 \
4 \
5 \
6 \
7
\end{array}
\begin{array}{c}
(2)\
\text {Units of Output}\
370 \
490 \
570 \
600\
620
\end{array}
\begin{array}{c}
(3)\
\text {Price}\
\$10\
9\
8\
7\
6
\end{array}
\end{array}$
 If an increase in consumers' income increases product price by $2 at each level of output,how many units of labor will the firm employ at a wage rate of $300?

Quizplus · Accepted Answer

The correct answer is C because at a wage rate of $300, the firm will employ 5 units of labor. This is because the marginal revenue product of labor (MRPL) is equal to the wage rate at this level of employment. The MRPL is the change in total revenue divided by the change in labor input. In this case, the MRPL is $100, which is equal to the wage rate of $300.

Columns 1 and 2 Make Up a Portion of a Monopolist's