-The preceding table gives monthly production information for Peter's Peanuts, a firm in a perfectly competitive industry. The market price of peanuts is $2.00 per pound. A worker costs $1,200 per month. How many workers does Peter hire to maximize his profit?

Question

Quizplus · Accepted Answer

To maximize profit, Peter should hire workers until the marginal cost of hiring an additional worker equals the marginal revenue product. Given the market price of $2.00 per pound, Peter should hire three workers, as this is the point where the additional revenue from hiring another worker no longer exceeds the cost of the worker.

-The Preceding Table Gives Monthly Production Information for Peter's Peanuts