If the price of widgets is $2 and the real wage is $20 per hour then the firm must sell 10 widgets to cover the cost of an hour of labour. If the price of widgets rises to $4, how many widgets must the firms sell to cover the cost of an hour of labour?

Question

Quizplus · Accepted Answer

When the price of widgets rises to $4, the firm only needs to sell $20 / $4 = 5 widgets to cover the cost of an hour of labor, since the real wage remains $20 per hour.

If the Price of Widgets Is $2 and the Real