Assume that a perfectly competitive firm hires workers from a perfectly competitive market for labor. The marginal product of a worker is 10 units per day

If the good that the worker produces is sold for $5, what is the maximum daily wage that should be offered to the worker?


The maximum wage that a firm should pay a worker is equal to the contribution of the worker to the firm's revenue. This is equal to the value of marginal product of the worker. In this case, the value of marginal product of the worker is 10 × $5 = $50. Hence, the maximum wage that should be offered to the worker is $50.

Economics

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