Question

Brenda owns a construction company that employs bricklayers and other skilled tradesmen. Her firm’s MRP for bricklayers is $22.25 per hour for each of the first seven bricklayers, $18.50 for an eighth bricklayer, and $17.75 for a ninth bricklayer. Given that she is a price taker when hiring bricklayers, how many bricklayers will she hire if the market equilibrium wage for bricklayers is $18.00 per hour?
A: Eight
B: More information is required to answer this question
C: Seven
D: Nine
E: Zero

Answer 1

Answer:

A) Eight

Explanation:

Since Brenda is a price taker, she will be able to hire bricklayers as long as her marginal revenue product (MRP) is higher than her marginal cost of hiring another bricklayer.

A bricklayer's wage per hour is $18.00:

• the first seven bricklayers provide a MRP of $22.25 which is larger than $18.00
• the eighth bricklayer provides a MRP of $18.50 which is still larger than $18.00
• but the ninth bricklayer provides a MRP of $17.75 which is lower than $18.00, so she shouldn't hire the ninth bricklayer.