Refer to Table 12-1. Suppose the output price is $3. If the firm represented in the table is maximising its profit by hiring six workers, what is the wage rate?
A) $120
B) $65
C) $40
D) There is insufficient information to answer the question.

Question

Quizplus · Accepted Answer

The marginal product of labor is 120 when the firm hires six workers. Since the firm is maximizing its profit, it will hire workers up to the point where the marginal product of labor equals the wage rate. Therefore, the wage rate must be $120.