The figure below shows output of a firm at different number of workers. Payment to workers is the only variable cost of the firm.

-Refer to the figure above.If the price of the output is $3.00 per unit and the wage is $9.00 per worker,the firm's optimal choice in the short run is to hire ________ workers.

Question

The figure below shows output of a firm at different number of workers. Payment to workers is the only variable cost of the firm.
 
-Refer to the figure above.If the price of the output is $3.00 per unit and the wage is $9.00 per worker,the firm's optimal choice in the short run is to hire ________ workers.

Quizplus · Accepted Answer

The optimal choice for the firm in the short run is to hire workers up to the point where the marginal revenue product (MRP) of labor equals the wage rate. At the wage rate of $9.00 per worker, the MRP of the 5th worker is equal to the wage rate of $9.00, which means that hiring any additional worker would result in a negative profit. Therefore, hiring 5 workers would maximize the firm's profit in the short run.

The Figure Below Shows Output of a Firm at Different