How is the wage to be paid to a worker determined by a profit-maximizing firm? If a marginal worker creates 8 units of a product in a month that is sold for $5 per unit, how much should be the maximum wage that should be paid to him?
What will be an ideal response?
A profit maximizing firm will pay a worker the value of the worker's marginal product, which is defined as the incremental income that this worker will generate for the firm.
Value of marginal product of the worker = 8 × $5 = $40. Hence, the maximum wage that should be paid to the worker is $40.
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