A firm pays the same wage rate to all its workers. At present, 20 workers are employed at $50 per day. Wages are subsequently raised to $55 per day in order to attract an extra worker. Thus, the marginal labor cost per day is
A)$5.
B)$21.
C)$55.
D)$155.

Question

Quizplus · Accepted Answer

The marginal labor cost is the additional cost incurred by hiring one more worker. Initially, the total wage cost for 20 workers is 20 x $50 = $1000. After hiring one more worker at $55, the total wage cost becomes 21 x $55 = $1155. The marginal labor cost is $1155 - $1000 = $155.

A Firm Pays the Same Wage Rate to All Its