Question

Given that the pairs of (Number of Workers, Output) were: (0,0); (1,50); (2,110); (3,300); (4,450); (5,590); (6,665); (7,700); (8,725); (9,710); (10,705) for a firm show the weekly relationship between output and number of workers for a factory with a fixed size of plant. if the wage rate is $500 and the price of output is $5

how many workers should the firm hire?

Answer 1

Question

A firm hire that number of workers corresponding to which marginal revenue product equals the wage rate.

If there is no explicit number of workers corresponding to which marginal revenue product equals the wage rate then firm hires that number of workers up to which marginal revenue product exceeds the wage rate.

The wage rate is $500.

The price of output is $5

Following table shows the marginal revenue product -

Number of workers	Output	Marginal Product	Marginal Revenue Product (Marginal Product * Price of Output)
0	0	-	-
1	50	50	250
2	110	60	300
3	300	190	950
4	450	150	750
5	590	140	700
6	665	75	375
7	700	35	175
8	725	25	125
9	710	-15	-75
10	705	-5	-25

The marginal revenue product exceeds wage rate up to hiring of 5 workers.

So,

The firm should hire 5 workers.