If a worker can produce 20 units of output which can be sold for $4 per unit, what is the maximum wage that firm should pay to hire this worker?
A) $80
B) $80 minus the firm's profit markup
C) It depends on what the going wage rate is in the labour market.
D) There is insufficient information to answer the question.

Question

Quizplus · Accepted Answer

The maximum wage the firm should pay the worker is equal to the value of the worker's marginal product, which is the additional output the worker produces. In this case, if the worker can produce 20 units of output that can be sold for $4 per unit, the value of the worker's marginal product is $80. Therefore, the maximum wage the firm should pay the worker is $80.

If a Worker Can Produce 20 Units of Output Which