Table 17.4
-Refer to Table 17.4.Suppose the firm is hiring only one worker when the wage rate is $12 and the output price is $2.Which of the following is true?

Question

Quizplus · Accepted Answer

The firm could increase its profit by hiring more labor if the marginal revenue product (MRP) of labor is greater than the wage rate. Since the output price is $2, if the marginal product of the next worker hired generates more than $6 worth of output (since $12 wage / $2 output price = 6 units of output to break even), hiring more labor would increase profits. Without specific numbers from Table 17.4, the principle that a firm should hire additional labor up to the point where MRP equals the wage rate suggests that if it's only hiring one worker at a wage of $12, and if hiring another worker would generate more than $12 in additional revenue, the firm could indeed increase its profit by hiring more labor.

Table 17.4 -Refer to Table 17.4.Suppose the Firm Is Hiring Only One