Question

The table identifies the total output produced for each given number of workers.

Workers	Output
1	100
2	190
3	270
4	340
5	400
6	450
7	490

At a nominal wage of $75 per unit labor and a price of output equal to $1 per unit, how many workers are hired?    

Enter a whole number.

Enter increase, decrease, or same for the rest of the questions below.

If the wage and price remain constant, an increase in labor productivity will  the number of workers hired.

In the labor market as a whole, the increase in labor productivity can be expected to  the real wage and  the level of employment.

Answer 1

At a nominal wage of $75, total number of workers hired occurs at that point when marginal revenue = marginal cost or they are close to each other. They are close to each other either at 3 or 4 workers hired. Profit is maximum when 3 workers are hired.

Workers	Output	Total cost from wages paid	Total Revenue	Marginal Cost	Marginal Revenue	Profit
1	100	75	100	-	-	-
2	190	150	190	75	90	40
3	270	225	270	75	80	45
4	340	300	340	75	70	40
5	400	375	400	75	60	25
6	450	450	450	75	50	0
7	490	525	490	75	40	-35

If the wage and price remain constant, rise in labor productivity will increase the number of workers hired because producers will demand more of labor.

In the labor market as a whole, increase in labor productivity can be expected to increase the real wage and increase the level of employment.