Asked by
Dontae Lunan
on Dec 08, 2024
Verified
A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of wheat is $2 a bushel, the wage rate is $10, the farmer employs five workers and the marginal product of the fifth worker is 3 bushels. What would you advise this farmer to do?
A) Do nothing because the wage rate and the marginal product of the last worker hired are equal.
B) Reduce employment because the wage paid is more than the marginal revenue product.
C) Increase employment because the wage paid is less than the marginal revenue product.
D) Reduce the product price so that the wage and marginal revenue product will be equal.
Marginal Product
The additional output that is generated by adding one more unit of a specific input, holding all other inputs constant.
- Evaluate the significance of marginal revenue product in deciding the appropriate employment level of labor.
- Acknowledge the association between pay scales, efficiency of labor, and job rates in a market-regulated labor sector.
Verified Answer
GG
Learning Objectives
- Evaluate the significance of marginal revenue product in deciding the appropriate employment level of labor.
- Acknowledge the association between pay scales, efficiency of labor, and job rates in a market-regulated labor sector.