When firm A hires one worker it pays $8 an hour and its total labor cost is $8.When it hires a second worker,it has to pay $8.50 to each of its two workers and its total labor cost is $17.When it hires a third worker,it has to pay $9 to each of its three workers and its total labor cost is $27.For firm A,

Question

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The marginal factor cost (MFC) is the additional cost of hiring one more worker. For the second worker, MFC is $9 ($17 - $8), and for the third worker, MFC is $10 ($27 - $17). These are above the wage rates of $8.50 and $9, respectively, indicating that MFC is above the wage rate except for the first worker.

When Firm a Hires One Worker It Pays $8 an Hour