Refer to Figure 10.4. At a market wage rate of $15, firms will hire ________ units of labor.

A) 175
B) 100
C) between 0 and 99
D) 0

Question

Refer to Figure 10.4. At a market wage rate of $15, firms will hire ________ units of labor.A)  175B)  100C)  between 0 and 99D)  0

Keith Massey · Accepted Answer

Final Answer : A, Explanation :  At a market wage rate of $15, firms will hire 175 units of labor. This is because the demand for labor is determined by the marginal revenue product of labor (MRPL), which is the additional revenue that a firm can earn by hiring one more unit of labor. The MRPL is equal to the marginal product of labor (MPL) multiplied by the price of the output. In this case, the MPL is 10 and the price of the output is $20, so the MRPL is $200. Since the market wage rate is $15, firms will hire labor up to the point where the MRPL equals the market wage rate. This occurs at 175 units of labor.

Refer to Figure 10.4. At a market wage rate of $15, firms will hire ________ units of labor.

A) 175
B) 100
C) between 0 and 99
D) 0

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