Table 18-1.The table displays data for a small,competitive,profit-maximizing firm that produces and sells envelopes.The time frame is one week.

-Refer to Table 18-1.If the value of the marginal product of the first worker hired is $938,then how many workers does the firm employ?

Question

Table 18-1.The table displays data for a small,competitive,profit-maximizing firm that produces and sells envelopes.The time frame is one week.
 
-Refer to Table 18-1.If the value of the marginal product of the first worker hired is $938,then how many workers does the firm employ?

Quizplus · Accepted Answer

The value of the marginal product (VMP) is the additional revenue that is generated by the additional worker. The firm chooses to hire employees up to the point where the VMP equals the wage rate. In this case, the wage rate is $700. Therefore, the firm will hire workers up to the point where VMP = $700.

At the point where the first worker is hired, the VMP is $938, which is greater than the wage rate. Therefore, the firm will hire at least one worker.

At the point where the second worker is hired, the VMP is $812, which is still greater than the wage rate. Therefore, the firm will hire at least two workers.

At the point where the third worker is hired, the VMP is $663, which is less than the wage rate. Therefore, the firm will not hire a third worker.

Therefore, the optimal number of workers for the firm to hire is 2. Answer choice B is correct.