Question

A competitive firm sells its output for $50 per unit. Assume that labor is the only input that varies for the firm. The marginal product of the 10th worker is 10 units of output per day; the marginal product of the 11th worker is 8 units of output per day. The firm pays its workers a wage of $160 per day. For the 10th worker, the value of the marginal product of labor is ________.A. $400. B. $1,280. C. $500. D. $250.

Answer 1

C. $500

Step-by-step explanation:

According to neoclassical economic theory, the factors of production are paid their marginal product. This payment is called the factor price.

In this case, labor is the factor of production, and the factor price is the wage, therefore, the wage is equal to the marginal product.

If the 10th worker has a marginal product of 10 units of output, and each unit of output is worth $50, then, his wage is:

10 x $50 = $500