Units of Labor

Quantity of Output

Product Price

Marginal Revenue Product

0

0

$17

1

10

$16

(A)

2

25

$15

(B)

3

32

$14

(C)

4

38

$13

(D)

5

43

$12

(E)

Use the table above. Assume all figures in the table pertaining to labor productivity are per-hour.

If the wage is $25 per hour, this firm should hire 4
If the wage is $50 per hour, this firm should hire 3

Question

Units of Labor

Quantity of Output

Product Price

Marginal Revenue Product

0

$17

1

10

$16

(A)

2

25

$15

(B)

3

32

$14

(C)

4

38

$13

(D)

5

43

$12

(E)

Use the table above. Assume all figures in the table pertaining to labor productivity are per-hour.

If the wage is $25 per hour, this firm should hire 4
If the wage is $50 per hour, this firm should hire 3

BlackTom AI · Accepted Answer

We need to carefully restate what’s given and then analyze what it implies.

Restating the question and data:
- The table provides, per hour, Quantity of Output, Product Price, and Marginal Revenue Product (MRP).
- The wage given in the prompt is either $25 per hour or $50 per hour.
- The answer field provided shows two selections: 4 and 3, which would imply hiring 4 workers at $25 and 3 workers at $50, respectively. However, the actual answer options are missing from the provided data, so we must base our analysis on the table values themselves rather than any stated option labels.

Understanding MRP and hiring rule:
- A firm hires workers up to the point where the marginal revenue product (MRP) of the last worker hired is at least equal to the wage, i.e., hire a worker if MRP ≥ wage, and stop when MRP falls below wage.
- The MRP values shown in the table (as given) are: $17 for the first relevant unit, then $16, $15, $14, $13, $12 as output increases from 0 to 5 per hour. All these MRPs are numerically between $12 and $17.

Evaluating the wage levels against the MRPs:
- If the wage is $25 per hour: Compare $25 to the available MRPs ($17, $16, $15, $14, $13, $12). In every case, MRP < wage. Since even the highest MRP ($17) is less than the wage ($25), hiring any additional worker would reduce profit. Therefore, at a wage of $25, the firm should hire 0 workers.
- If the wage is $50 per hour: The comparison remains the same as above. All MRPs ($17 down to $12) are well below $50. There is no hiring up to any positive level that would satisfy MRP ≥ wage. Therefore, at a wage of $50, the firm should also hire 0 workers.

Assessing the proposed options (4 and 3) against this analysis:
- Option 4 (hire 4 workers at $25): This implies MRP of at least the wage for the fourth worker, but the table’s MRPs are only between $12 and $17, all below $25. Therefore this option is inconsistent with the data and would be unprofitable.
- Option 3 (hire 3 workers at $50): Similarly, hiring 3 workers would imply MRPs at least as high as the wage of $50 for the third worker, which is not the case given the MRPs capped at $17. This option is also inconsistent with the data and would be unprofitable.

Why these specific wrong choices arise:
- A common mistake is treating the provided wage levels as something that can be met by modest MRPs. Here, the MRPs are far smaller than the wages, so any positive hiring would not occur under either wage scenario.
- Another misconception could be misreading the table or assuming an error in labeling; however, the central logic is simply comparing MRP values to wages, which clearly shows no hiring at either wage level.

Summarizing the implications from the data (without asserting the final label of any option):
- With wages of $25 or $50, none of the MRPs ($17 to $12) reach the level of the wage. Hence, the economically optimal decision is to hire 0 workers in both cases.

Notes on missing elements:
- The provided data presented two numerical selections (4 and 3) but did not include explicit option texts or other choices to evaluate. Based on the MRPs shown, those selections would not be correct under standard MR=MRP hiring logic, since the MRPs never reach the wage levels given.
- If additional context or corrected MRPs were provided (e.g., higher product prices leading to higher MRPs), the hiring decision could differ accordingly.

Princip of Econ-Microeconomics Module 10 Homework Assignment

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