Use the following table to answer the question : Table 16-2 : shows the number of bread loaves that can be produced per hour at various levels of labor use.The bakery is a perfectly competitive firm.

-Refer to Table 16-2.If the price of bread is $2 per loaf and the wage rate is $20 per hour,how many workers will the profit maximizing firm hire?
A)3
B)4
C)5

Question

Use the following table to answer the question : Table 16-2 : shows the number of bread loaves that can be produced per hour at various levels of labor use.The bakery is a perfectly competitive firm.

-Refer to Table 16-2.If the price of bread is $2 per loaf and the wage rate is $20 per hour,how many workers will the profit maximizing firm hire?
A)3 
B)4 
C)5

Quizplus · Accepted Answer

To maximize profits, the firm should hire workers up to the point where the marginal cost (MC) equals the price (P). At a wage rate of $20 per hour, the marginal cost of each unit (loaf of bread) produced is given by the column "MC" in the table. We can see that when 4 workers are hired, the MC of the 4th loaf is also $2, which is the price of bread. Therefore, the profit-maximizing firm will hire 4 workers.

Use the Following Table to Answer the Question : Table