-Refer to Table 16-1. Suppose the output price is $3. If the firm represented in the table is maximizing its profit by hiring six workers, what is the wage rate?

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Quizplus · Accepted Answer

The marginal revenue product of labor (MRPL) is the change in total revenue resulting from hiring one additional worker. The MRPL is equal to the marginal product of labor (MPL) multiplied by the output price. In this case, the MPL is 10 units of output and the output price is $3, so the MRPL is $30. The wage rate is the amount the firm must pay to hire one additional worker. The firm will maximize its profit by hiring workers up to the point where the MRPL equals the wage rate. In this case, the MRPL is $30, so the wage rate must be $30 for the firm to maximize its profit.