Question

"Suppose that the equilibrium market wage for a widget maker is $10/hour. A perfectly competitive firm hires its profit maximizing number of widget makers. If the price of a widget is $2, what was the marginal product of the last worker hired

Answer 1

marginal product of labor = 5 widgets per hour

Step-by-step explanation:

In order to maximize profits, the firm must produce the output quantity where marginal revenue = marginal cost. In this case, the marginal revenue is $2, so the marginal cost must also be $2.

If hiring the last widget maker costs $10 per hour, and the marginal cost per widget is $2, then the worker must be able to produce 5 widgets.