A firm operates in perfectly competitive product and labour markets. The table below shows the relationship between the number of workers employed per day and the firm's total daily output (Total Physical Product):
| Number of workers (LLL) | Total daily output (TPPTPPTPP, units) |
|---|---|
| 1 | 10 |
| 2 | 18 |
| 3 | 24 |
| 4 | 28 |
| 5 | 30 |
Initially, the market price of the good is £15 £15\,£15 and the daily wage rate is £90£90£90, meaning the firm maximizes profits by employing 3 workers.
If the market price of the good subsequently rises to £22.50 £22.50\,£22.50 while the daily wage rate remains unchanged at £90£90£90, how many workers should the firm employ to maximize its profits?
2 workers
3 workers
4 workers
5 workers
64 exam-style questions on AQA A Level Economics 1.6 The labour market (A-level only), covering 1.6.1 The demand for labour, marginal productivity theory, 1.6.2 Influences upon the supply of labour to different markets, 1.6.3 The determination of relative wage rates and levels of employment in perfectly competitive labour markets, 1.6.4 The determination of relative wage rates and levels of employment in imperfectly competitive labour markets, 1.6.5 The Influence of trade unions in determining wages and levels of employment, 1.6.6 The National Minimum Wage, and 1.6.7 Discrimination in the labour market. Each one has a worked solution and a mark scheme showing where the marks go.