The Upstart Company has the following production function. Number of Workers Number of Cases Produced
0 0
1 10
2 19
3 26
4 31
5 34

If the company hires 4 workers, which of the following could be the real wage rate?

a. 2
b. 4
c. 6
d. 8

b. 4

Explanation:

The computation of the real wage rate is as follows:

Number of workers      Number of cases produced    Marginal product

0                                                  0                                                        -

1                                                   10                                             10

2                                                  19                                             9

3                                                  26                                            7

4                                                 31                                              5

5                                                34                                               3

At optimal MP = real wage rate.

So,  

For 4th worker , MP is 5

And for 5th worker ,MP is 3

So in the case when we hire 4 workers so the real wage rate should lies in between of 3 and 4

Therefore the real wage rate is 4

(a) when insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal.

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