Question

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. The marginal revenue product of the second worker is:

Answer 1

Answer: $24

Explanation:

Given the following :

Total product for first worker hired = 24

Total product when two workers are hired = 32

Product price = $3 per unit

The marginal revenue product of a worker is equal to the product of the marginal product of labor (MPL) and the marginal revenue (MR) of output.

Marginal revenue product of second worker:

The marginal product of labor :

Change in output when additional labor is added

Therefore, change in product when worker increases from one to two workers ;

32 - 24 = 8 products

Marginal product of labor * product price

8 * $3 = $24