Consider the following information for a hypothetical economy: If the price per bicycle is $20 and the wage per worker is $40, then what is the marginal product of labor?
A) 20 bicycles
B) 2 bicycles
C) 0.5 bicycle
D) 1 bicycle

Question

Quizplus · Accepted Answer

The marginal product of labor (MPL) can be calculated as MPL = change in output / change in labor input. Assuming that one worker can produce one bicycle, if the price per bicycle is $20, the revenue from selling one bicycle would be $20. Since the wage per worker is $40, the cost of hiring one worker would be $40. Therefore, the change in output with the addition of one worker would be one bicycle, and the change in labor input would be one worker. Therefore, MPL = 1/1 = 1 bicycle. So, the correct choice is B, 2 bicycles.

Consider the Following Information for a Hypothetical Economy: If the Price