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-(Table: Workers and Corn Output) Look at the table Workers and Corn Output. Laura is a price-taking farmer who produces corn. Assume the wage rate for workers is $250 and the price per bushel of corn is $20. Laura should hire _____ workers to maximize profits.
A) one
B) two
C) four
D) seven

Question

Use the following to answer questions: 
-(Table: Workers and Corn Output) Look at the table Workers and Corn Output. Laura is a price-taking farmer who produces corn. Assume the wage rate for workers is $250 and the price per bushel of corn is $20. Laura should hire _____ workers to maximize profits.
A) one 
B) two 
C) four 
D) seven

Quizplus · Accepted Answer

Laura should hire four workers to maximize profits. The marginal product of labor is the additional output produced by hiring one more worker. The marginal revenue product of labor is the additional revenue generated by selling the additional output produced by hiring one more worker. The profit-maximizing level of employment is where the marginal revenue product of labor equals the wage rate. In this case, the marginal revenue product of labor is $20 (the price of corn) times the marginal product of labor. The marginal product of labor is 10 bushels of corn for the first worker, 8 bushels of corn for the second worker, 6 bushels of corn for the third worker, and 4 bushels of corn for the fourth worker. Therefore, the marginal revenue product of labor is $200 for the first worker, $160 for the second worker, $120 for the third worker, and $80 for the fourth worker. The wage rate is $250. Therefore, Laura should hire four workers to maximize profits.

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