Use the following to answer question -If hiring the 6th worker increases total product by 7 units and the price of each unit is $2, A)the firm should not hire the 6th worker as MRMC D)the firm should not hire the 6th worker as MR

Question

Use the following to answer question
 
-​If hiring the 6th worker increases total product by 7 units and the price of each unit is $2,
A)​the firm should not hire the 6th worker as MR<MC 
B)marginal revenue equals $2 
C)the firm should hire the 6th worker as MR>MC 
D)​the firm should not hire the 6th worker as MR<TC

Quizplus · Accepted Answer

Since hiring the 6th worker increases total product by 7 units, the marginal product of the 6th worker is 7. 
Assuming the firm is a price taker and the price of each unit is $2, the marginal revenue (MR) is also $2. 
Therefore, the marginal cost (MC) of hiring the 6th worker should be less than $2 for the firm to hire the worker. 
Since we don't have information on the marginal cost, we cannot say for sure whether the firm should hire the worker from a profit-maximizing perspective based on cost. However, given that MR>MC, the firm should hire the 6th worker from a revenue-maximizing perspective. Thus, the correct answer is C.

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