1. For a competitive firm hiring in a competitive labor market, the proft-maximi
ID: 1114941 • Letter: 1
Question
1. For a competitive firm hiring in a competitive labor market, the proft-maximizing rule is to hire labor to the point where: a. b. c. d. the marginal cost of the last unit of labor hired is zero. the value of the marginal product is equal to the wage rate. marginal product is equal to marginal cost. the value of the marginal product is at a maximum. Use the information in the table below to answer the next three questions. Labor(# workers) OutputperHour k 11 19 26 24 2. The marginal product (MP) of the fourth worker is. a. 14 b. 26 C. d. 6.6 3. If this firm is selling output in a perfectly competitive market and the price of the output is $2 per unit, then the value of marginal product (VMP) of the third worker is- a. $7 b. $8 c. $19 d. $16 4. If the price of the output is $2 per unit and the wage rate is $14 per hour, this profit-maximizing firm should hire workers a. 4 b. 5 d. 3Explanation / Answer
Answer:- for a competitive firm hiring in a competitive labor market, the profit maximizing rule is to hire labor to the point where
Correct Answer:- C:- Marginal product is equal to marginal cost
Reason:- The general rule is that firm maximizes profit by producing that quantity of output where marginal revenue equals marginal costs.
Answer:- The marginal product of fourth labor is:-
Correct Answer= C:- 7
Reason:- Marginal product of fourth labor = 26-19=7
Answer:-value of marginal product of third worker:-
Correct Answer:- $16
Reason:- value of marginal product of third worker:=(19-11)*2=$16
Answer:- The firm should hire:-
Labor
Output
Cost
Marginal cost
Revenue
Marginal Revenue
0
0
0
0
1
5
14
14
10
10
2
11
28
14
22
12
3
19
42
14
38
16
4
26
56
14
52
14
5
24
70
14
48
-4
As for profit maximization, the firm will hire that number of labor for which MR=MC
Thus the correct answer is :- 4 labors
Labor
Output
Cost
Marginal cost
Revenue
Marginal Revenue
0
0
0
0
1
5
14
14
10
10
2
11
28
14
22
12
3
19
42
14
38
16
4
26
56
14
52
14
5
24
70
14
48
-4
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