|
21. Firms will increase hiring as long as the Marginal Revenue Product (MRP) of labor is below the cost of hiring labor. Labor costs $20 per hour so for 7 workers to be hired the MRP of the 7th worker must be at least $20. The MRP of the 8th worker must be below $20 or more than 7 workers will be hired.
The Price Range column gives the range of output prices which would induce the firm to hire the number of workers in the left hand column. Since the 7th worker has a Marginal Product (MP) of 4 units the output price can't be any lower than $5, otherwise the MRP < 20 and the 7th won't be hired, so $5.00 is the minimum. The 8th worker has an MP of 3 so the price can't be quite as high as $20/3 = $6.67, otherwise the 8th worker would be hired.
|
| N | Q |
MP |
Price Range |
| 1 | 10 |
10 |
- |
| 2 | 22 |
12 |
$1.67-$2.22 |
| 3 | 31 |
9 |
$2.22 |
| 4 | 40 |
9 |
$2.22-$2.85 |
| 5 | 47 |
7 |
$2.85-$4.00 |
| 6 | 52 |
5 |
$4.00-$5.00 |
| 7 | 56 |
4 |
$5.00-$6.67 |
| 8 | 59 |
3 |
$6.67-$10.00 |
| 9 | 61 |
2 |
$10.00-$20.00 |
| 10 | 62 |
1 |
$20.00- |
|
