Asked by Jaren Harth on Jun 03, 2024
Verified
Answer the question on the basis of the following information.A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired;32 when two workers are hired;37 when three are hired;and 40 when four are hired.The farmer's product sells for $3 per unit and the wage rate is $13 per worker. Refer to the given information.How many workers should the farmer hire?
A) 1.
B) 2.
C) 3.
D) 4.
Wage Rate
The amount of money paid to an employee per unit of time or per task performed, often expressed as an hourly or piece rate.
Total Product
The overall quantity of output that a firm produces, usually within a given period.
Farmer
An individual involved in agricultural activities aimed at producing food, feed, fiber, and other goods by the systematic raising of domesticated plants and animals.
- Become familiar with the theory of marginal revenue product (MRP) and its significance in determining hiring strategies.
Verified Answer
SM
Sireen MusallamJun 10, 2024
Final Answer :
C
Explanation :
The marginal product of labor can be found by calculating the change in total product for each additional worker. The marginal products are: 8, 5, and 3. Since the price of the product is $3 and the wage rate is $13, the farmer should hire workers as long as their marginal product is greater than the wage rate. Therefore, the farmer should hire 3 workers since the marginal product of the fourth worker is less than the wage rate.
Learning Objectives
- Become familiar with the theory of marginal revenue product (MRP) and its significance in determining hiring strategies.