-Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4 and the wage rate is $50 per day, how many workers should Winnie employ to maximize his profit?

Question

Quizplus · Accepted Answer

To maximize profit, Winnie should employ workers up to the point where the marginal revenue product (MRP) equals the wage rate. The MRP is calculated as the price of the car wash ($4) multiplied by the marginal product of labor. By comparing the MRP with the wage rate ($50), Winnie should employ 3 workers, as this is the point where MRP is closest to the wage rate without being less than it.

-Winnie's Car Wash Is a Perfectly Competitive Firm