For a firm which has some power in the product market, the marginal revenue product of the fifth worker is $15 and the price of the last unit of output produced is $5. The firm will hire the fifth worker if the marginal product of the fifth worker is _____.
A)3 units of output
B)45 units of output
C)fewer than 3 units of output
D)greater than 3 units of output
E)greater than 75 units of output

Question

For a firm which has some power in the product market, the marginal revenue product of the fifth worker is $15 and the price of the last unit of output produced is $5. The firm will hire the fifth worker if the marginal product of the fifth worker is _____.​
A)3 units of output
B)45 units of output
C)fewer than 3 units of output
D)greater than 3 units of output
E)greater than 75 units of output

Quizplus · Accepted Answer

To determine if the firm should hire the fifth worker, we need to compare their marginal product (MP) to the marginal revenue product (MRP) of that worker.

If the MP is greater than the MRP, hiring the worker would lead to a decrease in profits. If the MP is less than the MRP, hiring the worker would increase profits.

In this case, we know that the MRP of the fifth worker is $15. We also know that the price of the last unit of output is $5. To find the MP required for the firm to hire the fifth worker, we can divide the MRP by the price of the last unit of output:

MP = MRP/price = $15/$5 = 3

Therefore, the firm will hire the fifth worker if their MP is greater than 3 units of output. That means the correct answer is (D) greater than 3 units of output.

For a Firm Which Has Some Power in the Product