The first 3 columns of the following table show data for a representative firm in an industry.The last 3 columns show the market demand and supply for the type of labour employed by this firm.

-Refer to the information above to answer this question.What is the firm's total wage bill if the firm maximizes its profits?
A)$30.
B)$64.
C)$120.
D)$154.
E)$192.

Question

The first 3 columns of the following table show data for a representative firm in an industry.The last 3 columns show the market demand and supply for the type of labour employed by this firm.
 
-Refer to the information above to answer this question.What is the firm's total wage bill if the firm maximizes its profits?
A)$30. 
B)$64. 
C)$120. 
D)$154. 
E)$192.

Quizplus · Accepted Answer

In order to maximize profits, the firm will hire workers up to the point where the marginal revenue product of labor (MRP) equals the wage rate (W). At 8 workers, MRP is $20 and at 9 workers, MRP decreases to $16. At this point, the additional revenue generated by hiring another worker is less than the cost of paying the additional wage. Therefore, the firm will hire 8 workers and pay each worker a wage of $15 (the market equilibrium wage rate). The total wage bill is 8 x $15 = $120.

The First 3 Columns of the Following Table Show Data