Questions
ECON_002_001_25F Problem Set 2
Single choice
If MPL = 6, the price of output is $4, and the wage is $30, then the firm should
Options
A.hire more labor
B.reduce labor
C.be at equilibrium
D.fire all workers
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Verified Answer
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Step-by-Step Analysis
To analyze the firm's hiring decision, we compute the marginal revenue product (MRP) of labor, which tells us the value of hiring one more unit of labor.
First, calculate MRP = P × MPL. Here, P = 4 and MPL = 6, so MRP = 4 × 6 = 24.
Now compare MRP to the wage:......Login to view full explanationLog in for full answers
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