The following table shows output per hour produced by the different units of labor.Table 14.1
The marginal revenue product of a resource is equal to the product of the marginal product of an input and marginal revenue.
-According to Table 14.1, if the wage rate is $6 per hour, how many workers should this firm hire?
A)3
B)2
C)4
D)5

Question

The following table shows output per hour produced by the different units of labor.Table 14.1
The marginal revenue product of a resource is equal to the product of the marginal product of an input and marginal revenue. 
-According to Table 14.1, if the wage rate is $6 per hour, how many workers should this firm hire?
A)3 
B)2 
C)4 
D)5

Quizplus · Accepted Answer

To determine the optimal number of workers to hire, we need to look for the point where the marginal revenue product of labor equals the wage rate. At $6 per hour, the marginal revenue product of the first worker is $10, the second worker is $8, the third worker is $6, the fourth worker is $4, and the fifth worker is $2. Adding up the marginal revenue products of the first three workers gives us a total of $24, which is equal to the wage rate. Therefore, the firm should hire three workers. Beyond this point, the marginal revenue product of each additional worker is less than the wage rate, so hiring more workers would lead to diminishing returns and lower profits.

The Following Table Shows Output Per Hour Produced by the Different