If the wage paid to labor is $8 and the price of each unit of output is $2, exactly how many devices of labor will be hired?
A firm will hire labor till the marginal revenue product of labor is lower than the cost of labor/wage, which is $8. The marginal revenue product of labor is the marginal product of labor multiplied by the product"s price. The marginal revenue of the fourth unit of labor is $10 (five devices multiplied by $2) and the marginal revenue of the fifth unit of labor is $6 (three systems multiplied by $2). Thus, the firm will certainly hire 4 systems of labor.
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A firm is hiring labor in a perfectly competitive labor market. If the marginal revenue product of labor is better than the wage rate, which of the complying with is true?
A profit maximizing firm will certainly hire labor till the marginal product of labor is better than the wage rate. If the marginal product of labor is greater than the wage rate, then the firm need to hire more labor till the 2 values are equal.
Like any kind of industry, the profit maximization level is the point at which marginal price equals marginal revenue. In this instance, the marginal cost of labor is the labor wage. Thus, the profit maximization point for the employer is the allude at which wage equates to the marginal revenue product of labor.
Refer to the following chart for this question:
If each product is sold for $2, what is the marginal revenue product of labor for the fourth unit of labor?
The marginal revenue product of labor for the fourth unit of labor is its marginal product multiplied by the expense of the product. The marginal product of the fourth unit of labor is 4 (the difference in between total manufacturing at 4 devices of labor and also 3 units of labor), and also price of the product is $2, so the marginal revenue product of labor for the fourth unit is $8.
Refer to the adhering to chart for this question:
If each product is sold for $2, and each unit of labor expenses $10, how many type of devices of labor will certainly the firm hire?
The firm will hire three devices of labor, because it will certainly continue to hire till the wage exceeds the marginal revenue product of labor (MRPL). The MRPL after the 3rd unit of labor is much less than $10, which indicates that the firm will certainly not hire even more than three devices of labor.
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