Exhibit 26-4

Refer to Exhibit 26-4. In evaluating the marginal cost and revenue of hiring additional units of labor, the firm will not hire

Question

Exhibit 26-4 ​

Refer to Exhibit 26-4. In evaluating the marginal cost and revenue of hiring additional units of labor, the firm will not hire

Quizplus · Accepted Answer

The firm should hire workers up to the point where MRP equals the market price of the input or labor. In this case, that point is the fourth worker as their MRP intersects with the market price of labor. Beyond this point, MRP decreases and becomes less than the market price of labor, leading to negative marginal revenue and a loss for the firm. Therefore, the best choice is not to hire the fifth worker (option B) as their MRP is lower than the market price of labor.

Exhibit 26-4 ​ Refer to Exhibit 26-4. in Evaluating the Marginal Cost and the Marginal

Exhibit 26-4 Refer to Exhibit 26-4. in Evaluating the Marginal Cost and the Marginal