Table 18-8
Harold and Maude own a dance studio where they and their employees teach ballroom dancing. Their company is a competitive, profit-maximizing firm. Harold and Maude's production function is detailed in the table below.
-Refer to Table 18-8. If Harold and Maude offer a special sale for one day where dance lessons are $5 each, and if they pay their workers $200 per day for that day, what is the maximum number of workers that they will hire for that day?

Question

Table 18-8
Harold and Maude own a dance studio where they and their employees teach ballroom dancing. Their company is a competitive, profit-maximizing firm. Harold and Maude's production function is detailed in the table below. 
-Refer to Table 18-8. If Harold and Maude offer a special sale for one day where dance lessons are $5 each, and if they pay their workers $200 per day for that day, what is the maximum number of workers that they will hire for that day?

Quizplus · Accepted Answer

The maximum number of workers that they will hire for that day is when the marginal product of labor (MPL) is equal to the wage rate ($200). At 3 workers, the MPL is 150, which is equal to the wage rate, making it the optimal choice. At 4 workers, the MPL falls below the wage rate, causing their total costs to increase and reducing their profit. Therefore, the best choice is to hire 3 workers.

Table 18-8 Harold and Maude Own a Dance Studio Where They and They