A firm's labor input,total output of labor,and product price schedules are given below.Labor is the only variable input. Refer to the above table and information.How many workers will the firm hire if the wage rate is $8 per day?
A) 3
B) 4
C) 5
D) 6 The marginal revenue product is the change in revenue earned due to the hiring of one more input.In this case,the fifth worker adds 4 units of output and $9 of revenue because revenue rises from $152 to $161,but the worker only costs $8.At higher levels of workers,the marginal revenue product is less than $8.

Question

A firm's labor input,total output of labor,and product price schedules are given below.Labor is the only variable input.  Refer to the above table and information.How many workers will the firm hire if the wage rate is $8 per day?
A) 3 
B) 4 
C) 5 
D) 6 The marginal revenue product is the change in revenue earned due to the hiring of one more input.In this case,the fifth worker adds 4 units of output and $9 of revenue because revenue rises from $152 to $161,but the worker only costs $8.At higher levels of workers,the marginal revenue product is less than $8.

Quizplus · Accepted Answer

The firm should continue to hire workers until the marginal revenue product equals the wage rate. From the table, we can see that the fifth worker has a marginal revenue product of $9, which is greater than the wage rate of $8. Therefore, the firm should hire up to and including the fifth worker to maximize profits. Thus, the answer is (C) 5.

A Firm's Labor Input,total Output of Labor,and Product Price Schedules