A worker's hourly wage is $25 and output sells for $5 a unit.What is the minimum marginal product a worker must produce in order for a competitive employer to break even when hiring the worker?
A) 1/5
B) 5
C) 25
D) 125

Question

Quizplus · Accepted Answer

To break even, the revenue earned by the employer hiring the worker must equal the cost of hiring the worker. The cost of hiring one worker for one hour is $25. The revenue earned from selling the output of the worker must be greater than or equal to $25. Since the output sells for $5 a unit, the worker must produce at least 5 units in order to generate $25 in revenue. Therefore, the minimum marginal product a worker must produce is 5 units. Thus, the correct option is B.

A Worker's Hourly Wage Is $25 and Output Sells for $5