The following table shows data for a perfectly competitive firm. The first column shows the number of resources employed in production, the second column shows the total product of the firm, and the third column shows its product price. If the wage rate is $44, then the number of workers hired is _____.
Table 11.3

A)two
B)three
C)five
D)seven
E)nine

Question

The following table shows data for a perfectly competitive firm. The first column shows the number of resources employed in production, the second column shows the total product of the firm, and the third column shows its product price. If the wage rate is $44, then the number of workers hired is _____. ​
Table 11.3
​

A)two 
B)three 
C)five 
D)seven 
E)nine

Quizplus · Accepted Answer

In a perfectly competitive market, the firm hires workers up to the point where the value of the marginal product (VMP) equals the wage rate. VMP is calculated by multiplying the marginal product (MP) of each worker by the product price (P).

As seen in the table, the VMP of the 4th worker is $220, which is less than the wage rate of $44. The VMP of the 5th worker is $220, which is equal to the wage rate. Therefore, the firm would hire 5 workers to maximize its profits.

The Following Table Shows Data for a Perfectly Competitive Firm