For a firm that has some power in the product market,the marginal revenue product of the fifth worker is $15 and the price of the last unit of output produced is $5.The firm will hire the fifth worker if the marginal product of the fifth worker is _____
A)3 units of output.
B)45 units of output.
C)fewer than 3 units of output.
D)greater than 3 units of output.
E)greater than 75 units of output.

Question

Quizplus · Accepted Answer

Since the marginal revenue product of the fifth worker is $15 and the price of the last unit of output produced is $5, the firm will hire the fifth worker if the marginal product of the fifth worker generates more than $5 in revenue for the firm.

Therefore, the firm will hire the fifth worker if the marginal product of the fifth worker is greater than $5/$15 = 1/3 of a unit of output.

So, the best choice is (D) greater than 3 units of output.

For a Firm That Has Some Power in the Product