Exhibit 11-11

-Exhibit 11-11 shows data on watch production. If the marginal resource cost is constant at $18 per unit of labor, how many workers should the firm hire to maximize its profit?

Question

Exhibit 11-11
 
-Exhibit 11-11 shows data on watch production. If the marginal resource cost is constant at $18 per unit of labor, how many workers should the firm hire to maximize its profit?

Quizplus · Accepted Answer

To maximize profit, the firm should produce where marginal revenue equals marginal cost. In this case, the marginal cost is given as the constant $18 per unit of labor. Looking at the data in Exhibit 11-11, we can see that at the third worker, the marginal revenue is also $18. Any additional worker would have a marginal revenue less than the marginal cost of $18, so the firm should only hire three workers to maximize its profit.

Exhibit 11-11 -Exhibit 11-11 Shows Data on Watch Production. If the Marginal