# Chapter 1. Figure It Out 13.1

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Victoria’s Tours, Inc. is a travel company that offers guided tours of nearby mountain biking trails. Its marginal revenue product of labor is given by MRPL = 1000 – 40L, where L is the number of tour-guide-weeks it hires (a tour-guide-week is the amount of work done by one tour guide working one full-time week) and MRPL is measured in dollars per tour-guide-week. The going market wage in the city where Victoria’s Tours is located is \$600 per tour-guide-week.

What is the optimal amount of labor for Victoria’s Tours to hire?

### Question

Victoria’s Tours should hire Pz2PEfhsNWI= workers.

When Victoria’s Tours hires the optimal amount of labor, the marginal revenue product of labor (1,000 – 40L) will equal the wage (600). So, 1,000 – 40L = 600, or L = 10. For further review see section “Demand in a Perfectly Competitive Factor Market”.

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At and above what market wage would Victoria’s Tours not want to hire anyone?

### Question

Victoria’s Tours will not want to hire anyone at any wage higher than \$ SZriiDH8Hb1Rld5p1fPo0A== per week.

The firm will hire labor until the marginal revenue product of labor equals the existing wage. The marginal revenue product of labor is 1,000 – 40L; the wage is w, so Victoria’s Tours hires until 1,000 – 40L = w. If Victoria’s Tours doesn’t want to hire any workers, then L = 0. Substitute 0 for L to get 1,000 – 40(0) = w, or w = 1,000. So, at a wage of \$1,000 per week or more, Victoria’s Tours will not want to hire anyone. For further review see section “Demand in a Perfectly Competitive Factor Market”.

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What is the most labor Victoria’s Tours would ever hire given its current marginal revenue product?

### Question

Victoria’s Tours would never hire more than Bqf/EtUReUc= workers.

Victoria’s Tours will hire until the marginal revenue product of labor (1,000 – 40l) equals the wage, w. It will hire the greatest number of workers when they are free. At a wage of zero, Victoria’s Tours will hire until 1,000 – 40l = 0, or l = 25. Hiring more than 25 workers, even if those workers are unpaid, will reduce revenue. Therefore, Victoria’s Tours would hire, at most, 25 workers. For further review see section “Demand in a Perfectly Competitive Factor Market”.