Question

If the MPP of an additional unit of labor is 4 units per hour, product price is constant at $9 per unit, and the wage rate is $35 per hour, then:

Answer 1

The additional worker should be hired.

Step-by-step explanation:

we need to calculate the marginal revenue product and than see if it is higher or lower than the marginal cost of hiring the extra worker.

MRP = MPP x price per unit sold = 4 units per hour x $9 per unit = $36 per hour

Marginal cost = $35 per hour

since the MRP ($36) is higher than the MC ($35), then the additional worker should be hired.