(Table: Sunshine Flower Vase Co.) Refer to the table. If thereis competition from new immigrants that lowers the marketwage for each worker from $100 to $70 per day, how manyworkers would the firm hire?

Question

Quizplus · Accepted Answer

The firm will hire workers up to the point where their marginal revenue product is equal to their wage rate. At a market wage of $70, the marginal revenue product of the fifth worker is still greater than the wage, so the firm would hire five workers. However, at six workers, the marginal revenue product is only $60, which is less than the wage, so the firm would not hire a sixth worker. Therefore, the answer is C.