Marginal Revenue Product: How many workers to hire?
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Complete the following table for the firm below which is selling its product in a perfectly competitive market and hiring labor in a perfectly competitive labor market. State how many workers the firm will hire at various wages. Explain.
TP = Total Product
MP = Marginal Product
MRP = Marginal Revenue Product
Workers TP MP Price MRP
1 12 ______ $10 ______
2 22 ______ 10 ______
3 30 ______ 10 ______
4 36 ______ 10 ______
5 40 ______ 10 ______
6 42 ______ 10 ______
a) How many workers will the firm hire at a wage of:
$20 _______
$30 _______
$40 _______
b) Explain.
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Solution Summary
This solution gives detailed calculations showing how a firm uses Marginal Revenue Product to decide how many workers to hire at a given wage.
Solution Preview
a) See the attached file for the table.
$20: 6 workers
$30: 5 workers
$40: 5 workers
b)
MRP is the ...
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