Below is a graphical illustration of Nearly Done Inc.'s marginal revenue product.The firm employs its labour in a perfectly competitive labour market.

-Refer to the above information to answer this question.How much labour will Nearly Done Inc.employ if the market wage rate is $12?
A)2.
B)4.
C)6.
D)8.
E)Cannot be determined.

Question

Below is a graphical illustration of Nearly Done Inc.'s marginal revenue product.The firm employs its labour in a perfectly competitive labour market.
 
-Refer to the above information to answer this question.How much labour will Nearly Done Inc.employ if the market wage rate is $12?
A)2. 
B)4. 
C)6. 
D)8. 
E)Cannot be determined.

Quizplus · Accepted Answer

The firm will employ labour up to the point where the marginal revenue product (MRP) is equal to the wage rate in a perfectly competitive labour market. At a wage rate of $12, the MRP of the 6th worker is equal to $12, which means that the firm will hire 6 workers. Beyond this point, the MRP of each additional worker is less than the wage rate, so hiring additional workers would result in losses for the firm. Therefore, the best choice is to employ 6 workers.

Below Is a Graphical Illustration of Nearly Done Inc