-The preceding table gives monthly production information for Peter's Peanuts, a firm in a perfectly competitive industry. The market price of peanuts is $2 per kilogram. If a worker costs $800 per month, how many workers will Peter employ to maximise profit?
A) Two
B) Four
C) Zero
D) One

Question

-The preceding table gives monthly production information for Peter's Peanuts, a firm in a perfectly competitive industry. The market price of peanuts is $2 per kilogram. If a worker costs $800 per month, how many workers will Peter employ to maximise profit?
A) Two 
B) Four 
C) Zero 
D) One

Quizplus · Accepted Answer

To maximize profit, Peter should employ the number of workers where marginal cost equals marginal revenue. Given the market price of $2 per kilogram, Peter should employ four workers if the marginal product of the fourth worker multiplied by the price is greater than or equal to the cost of the worker ($800).

-The Preceding Table Gives Monthly Production Information for Peter's Peanuts