The following figure depicts the labor markets of two different firms.

-Refer to the figure above.If firm A wants to hire 6 employees and pay a wage of $6,what is the market price of its output?

Question

The following figure depicts the labor markets of two different firms.
 
-Refer to the figure above.If firm A wants to hire 6 employees and pay a wage of $6,what is the market price of its output?

Quizplus · Accepted Answer

To hire 6 employees, firm A needs to pay a wage of $6, which is the point where the firm's labor demand intersects with the labor supply. At this point, the market wage rate is $1, which is the price that workers are willing and able to work for. To find the market price of output, we need to look at the point where labor demand intersects with the marginal revenue product (MRP) curve. At a wage rate of $1, firm A can hire 6 workers, and the MRP of the 6th worker is $6. Therefore, the market price of firm A's output is $6/6 = $1.

The Following Figure Depicts the Labor Markets of Two Different