(Table: Value of the Marginal Product of Labor and Demand) In the figure Value of the Marginal Product of Labor and Demand, the total product of labor is shown for the hourly production of power cords.If the price of a power cord is $2 and the market wage rate is $60 per hour, the profit-maximizing quantity of labor is __ workers.
A)zero
B)two
C)four
D)six

Question

Quizplus · Accepted Answer

The profit-maximizing quantity of labor is where the value of the marginal product of labor (VMPL) is equal to the wage rate. At a wage rate of $60, this occurs at 4 workers. At any quantity of workers above 4, the VMPL is less than the wage rate and it is not profitable to hire additional workers. Therefore, the profit-maximizing quantity of labor is 4 workers.