Consider the labor market shown here. If an efficiency wage of $45 is instituted, the number of workers who are actually hired is:

A)15,000.
B)5,000.
C)10,000.
D)25,000.

Question

Consider the labor market shown here. If an efficiency wage of $45 is instituted, the number of workers who are actually hired is:

A)15,000. 
B)5,000. 
C)10,000. 
D)25,000.

Quizplus · Accepted Answer

With an efficiency wage of $45, the marginal revenue product of labor (MRPL) decreases to $45 at the 5,000th unit of labor. At this point, the wage rate equals the MRPL and there is no further incentive for firms to hire more workers. Therefore, the number of workers who are actually hired is 5,000.

Consider the Labor Market Shown Here