Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.

-Refer to the scenario above.If the wage rate in this market is equal to $9,this firm will hire ________ workers.

Question

Scenario: Consider a firm that produces and sells a good for the price of $2 in a perfectly competitive market. The following table shows the relationship between the number of workers and the output of this firm. Suppose the labor market from which this firm hires its employees is competitive.
 
-Refer to the scenario above.If the wage rate in this market is equal to $9,this firm will hire ________ workers.

Quizplus · Accepted Answer

To determine the optimal number of workers to hire, the firm should hire workers up to the point where the marginal revenue product (MRP) equals the wage rate. The MRP is the additional revenue generated by each additional worker. In this case, the MRP for the fourth worker is $8, which is less than the wage rate of $9. Therefore, the firm will not hire a fifth worker, as the MRP is less than the wage rate. Thus, the optimal number of workers to hire in this case is 4.

Scenario: Consider a Firm That Produces and Sells a Good