Consider the table.If the price per unit of output is $15 and wages paid each day is $225, how many people should the firm hire to maximize profit? $$\begin{array} { | c | c | }
\hline \begin{array} { c }
\text { Units af } \
\text { Labdr }
\end{array} & \text { Output } \
\hline 0 & 0 \
\hline 1 & 7 \
\hline 2 & 19 \
\hline 3 & 34 \
\hline 4 & 47 \
\hline 5 & 57 \
\hline
\end{array}$$

Question

Consider the table.If the price per unit of output is $15 and wages paid each day is $225, how many people should the firm hire to maximize profit? $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Units af } \
\text { Labdr }
\end{array} & \text { Output } \
\hline 0 & 0 \
\hline 1 & 7 \
\hline 2 & 19 \
\hline 3 & 34 \
\hline 4 & 47 \
\hline 5 & 57 \
\hline
\end{array}$$

Quizplus · Accepted Answer

To maximize profit, we need to find the level of output that corresponds to the highest difference between total revenue and total cost. We can calculate the total revenue for each level of labor using the given price per unit of output of $15. For example, if 2 units of labor are hired, the corresponding output is 19 units, so the total revenue would be 19 x $15 = $285.

To calculate total cost, we need to add the cost of wages to the cost of production, which is the same as the total revenue. For example, if 2 units of labor are hired, the total cost would be $285 (which is the total revenue) + $225 (the cost of wages) = $510.

Using this method, we can calculate the total cost for each level of labor, and then subtract it from the total revenue to find the corresponding profit.

| Units of Labor | Output  | Total Revenue | Total Cost | Profit |
|----------------|---------|---------------|------------|--------|
| 0              | 0       | $0            | $0         | $0     |
| 1              | 7       | $105          | $240       |-$135   |
| 2              | 19      |$285           |$510        |-$225   |
| 3              | 34      |$510           |$765        |-$255   |
| 4              | 47      |$705           |$1020       |-$315   |
| 5              | 57      |$855           |$1275       |-$420   |

As we can see, the highest profit of $315 occurs when 4 units of labor are hired. Therefore, the firm should hire 4 people to maximize profit.

Consider the Table A)2 B)3 C)4 D)5

Consider the Table A)2
B)3
C)4
D)5