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.Suppose the firm sells each box of envelopes that it produces for $7.50.How many workers should the firm hire?

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.Suppose the firm sells each box of envelopes that it produces for $7.50.How many workers should the firm hire?

Quizplus · Accepted Answer

The firm should hire workers up to the point where the marginal revenue product (MRP) equals the wage rate. If the wage rate is not given, the firm should hire workers until the MRP of the last worker hired is greater than or equal to the cost of hiring that worker. Assuming the MRP is calculated by multiplying the marginal product of labor by the price per box ($7.50), the firm should hire 4 workers if the MRP of the 4th worker is still greater than or equal to the wage rate, and the MRP of the 5th worker is less than the wage rate.