The marginal revenue product of labour in the local saw mill is MRPL = 20 - .5L, where L = the number of workers. If the wage of saw mill workers is $10 per hour, then how many workers will the mill hire?
A)20
B)30
C)10
D)25

Question

Quizplus · Accepted Answer

The mill will hire workers until the marginal revenue product of labor (MRPL) equals the wage rate. Setting MRPL = 10, we have 20 - 0.5L = 10. Solving for L gives L = 20.

The Marginal Revenue Product of Labour in the Local Saw