The following question(s) deal with the Widget Company, which produces widgets. Widgets are produced according to:

-If the real wage is equal to 7 widgets,and only an integer number of workers can be hired,the Widget company should hire
A) 2 workers.
B) 3 workers.
C) 4 workers.
D) 5 workers.
E) 6 workers.

Question

The following question(s) deal with the Widget Company, which produces widgets. Widgets are produced according to:
 
-If the real wage is equal to 7 widgets,and only an integer number of workers can be hired,the Widget company should hire
A) 2 workers. 
B) 3 workers. 
C) 4 workers. 
D) 5 workers. 
E) 6 workers.

Quizplus · Accepted Answer

To find out how many workers the Widget Company should hire, we need to determine the point at which the marginal product of labor (MPL) equals the real wage. Using the table provided, we can calculate the MPL for each additional worker as follows:

MPL for first worker = 5
MPL for second worker = 4
MPL for third worker = 3
MPL for fourth worker = 2
MPL for fifth worker = 1

Since the real wage is equal to 7 widgets, the Widget Company should hire the number of workers that corresponds to an MPL of 7 or greater. The MPL for 1 and 2 workers is greater than 7, but the total output produced by those workers (5 + 6 = 11) is less than the output produced by 3 workers (5 + 4 + 3 = 12). Therefore, the Widget Company should hire 3 workers to maximize their production and make efficient use of their resources.

The Following Question(s) Deal with the Widget Company, Which Produces