Scenario: The Decision to Hire Labor Assume that both the product market and the labor market are perfectly competitive.The price of
This firm's product is $5.The firm's total product with respect to labor is given in the table that follows.
(Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire Labor.What is the VMP of the third worker to this firm?
A)$5
B)$25
C)$18
D)$10

Question

Quizplus · Accepted Answer

The VMP (Value of Marginal Product) of the third worker to this firm is $25. This can be calculated by taking the difference between the total product of two workers (20) and the total product of three workers (40), and multiplying that by the price of the product ($5). Therefore, the third worker adds $25 of value to the firm's output and is worth hiring.

Scenario: the Decision to Hire Labor Assume That Both the Product