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-(Table: Workers and Corn Output)Use Table: Workers and Corn Output.Laura is a price-taking farmer who produces corn.Assume that the wage rate for workers is $250 and the price per bushel of corn is $20.Laura should hire _____ workers to maximize profits.
A)1
B)2
C)4

Question

Use the following to answer question: 
-(Table: Workers and Corn Output)Use Table: Workers and Corn Output.Laura is a price-taking farmer who produces corn.Assume that the wage rate for workers is $250 and the price per bushel of corn is $20.Laura should hire _____ workers to maximize profits.
A)1 
B)2 
C)4

Quizplus · Accepted Answer

Laura's profit is maximized when her marginal revenue product (MRP) equals her marginal cost (MC) of labor. From the table, we can see that the MRP of the 4th worker is $500 (20 bushels x $25/bushel) and the MC of the 4th worker is also $500 ($250 wage / 0.5 bushels of corn per worker). Therefore, hiring 4 workers would maximize Laura's profits. Hiring additional workers would increase Laura's costs, as their MRP is lower than their MC, resulting in a decrease in profits.

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