Assume that the marginal product of labor employed by a competitive firm is 2 units and that the wage rate is $10.To maximize profits,the firm will hire an extra unit of labor to the point where the product price is equal to _____.
A)$10
B)$3
C)$4
D)$5

Question

Quizplus · Accepted Answer

To maximize profits, a competitive firm hires labor until the marginal revenue product (MRP) equals the wage rate. MRP is the marginal product of labor (2 units) times the product price. If the wage rate is $10, then 2 * Price = $10, so Price = $5.

Assume That the Marginal Product of Labor Employed by a Competitive