The output price halves from $20 to $10, so marginal revenue products become $90, $80, $60, $50 and $30. At an unchanged $100 wage, how many workers are hired?

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Question

The output price halves from $20 to $10, so marginal revenue products become $90, $80, $60, $50 and $30. At an unchanged $100 wage, how many workers are hired?

Accepted Answer

None, since even the most productive worker adds only $90 — Award 1 mark. Nothing about the workers changed — demand for labour collapsed entirely because demand for the product did. That is derived demand in one step.

Answer

Four workers, as before

Answer

None, since even the most productive worker adds only $90

Answer

One worker, since $90 is close to the wage

Answer

Two workers

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