Use the following graph,which depicts Mighty Max's labor demand for his duffel bag business,to answer the following questions.The labor demand curve shown is calculated based on a duffel bag price of $10.

-If the wage of the fifth worker is $20 and his or her value of the marginal product of labor is $25,the firm
A) benefits by stopping at this level of labor.
B) is likely to fire the fifth worker.
C) asks this fifth worker to work overtime.
D) is likely to benefit by hiring more workers.
E) is likely to lose profit by hiring more workers.

Question

Use the following graph,which depicts Mighty Max's labor demand for his duffel bag business,to answer the following questions.The labor demand curve shown is calculated based on a duffel bag price of $10.
 
-If the wage of the fifth worker is $20 and his or her value of the marginal product of labor is $25,the firm
A) benefits by stopping at this level of labor. 
B) is likely to fire the fifth worker. 
C) asks this fifth worker to work overtime. 
D) is likely to benefit by hiring more workers. 
E) is likely to lose profit by hiring more workers.

Quizplus · Accepted Answer

Since the value of the marginal product of labor (VMPL) is greater than the wage, the firm is earning a profit from hiring the fifth worker. This means that there is room for the firm to hire more workers, as long as the VMPL remains greater than the wage. Therefore, hiring additional workers would likely benefit the firm.

Use the Following Graph,which Depicts Mighty Max's Labor Demand for His