Figure 18-1
-Refer to Figure 18-1. Suppose the firm sells its output for $14 per unit, and it pays each of its workers $143 per day. How many workers will the firm hire to maximize its profit?

Question

Figure 18-1 
-Refer to Figure 18-1. Suppose the firm sells its output for $14 per unit, and it pays each of its workers $143 per day. How many workers will the firm hire to maximize its profit?

Quizplus · Accepted Answer

To maximize profit, a firm will hire workers up to the point where the marginal revenue product (MRP) of labor equals the wage rate. MRP is calculated as the additional revenue generated by hiring one more worker. Without the specific figure (Figure 18-1) to reference, we typically look for the point where the additional output produced by the last worker hired, multiplied by the price per unit ($14), is equal to or just above the wage rate ($143). Since the exact output levels per worker are not provided, we rely on the correct answer provided, which is 4 workers. This suggests that hiring the fourth worker generates additional revenue equal to or slightly above $143, while hiring the fifth does not.

Figure 18-1 -Refer to Figure 18-1. Suppose the Firm Sells Its Output