Use the following to answer questions 11-16: -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 MBMC D)the firm should not hire the 6th worker as MB

Question

Use the following to answer questions 11-16:
 
-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 MB<MC 
B)marginal revenue equals $2 
C)the firm should hire the 6th worker as MB>MC 
D)the firm should not hire the 6th worker as MB<TC

Quizplus · Accepted Answer

Since the total product increases by 7 units with the hiring of the 6th worker, the marginal benefit (MB) is 7 units. The marginal cost (MC) is the cost of hiring the 6th worker, which is the additional wage paid to the worker. We do not have information on the wage, so we cannot calculate MC directly. However, if the wage is less than $14 (7 units x $2), then MB>MC and the firm should hire the 6th worker. If the wage is more than $14, then MB<MC and the firm should not hire the 6th worker. Without information on the wage, we cannot definitively say whether the firm should hire the 6th worker, but we can say that the firm should hire the 6th worker if the wage is less than $14, since MB>MC in that case.

Use the Following to Answer Questions 11-16