Question

Col1 Units of Labor 0 1 2 3 4 5Col2 Quantity of Output 0 10 18 25 31 33Col3 Marginal Revenue $10 10 10 10 10 Refer Above .Assume that the firm is a factor price taker and that the price of a unit of labor is constant at $60. The firm should hire __________ of labor.A. one unitB. three unitsC. five unitsD. two unitsE. four units

Answer 1

Answer:

correct option is E. four units

Explanation:

given data

Units of Labor                  0    1    2   3    4   5

Quantity of Output          0   10  18  25  31  33

Marginal Revenue           10  10  10  10  10  10

labor price unit = $60

to find out

how many labour firm should hire

solution

we can say firm should hire 4 unit labour

because as we know MRP is equal to wage so

and Marginal Revenue is constant so P = $10

so MPP of 4th labor will be

MPP 4th = 31 - 25

MPP 4th = 6

so MR Price = MPP × price

MRP = 6 × 10 = $60

so correct option is E. four units