Table 18-2
The production details of a small apple farm are shown below.Suppose the market for both apple and apple pickers is competitive, with a current market price for a box of apples being $10.Further, assume apple pickers are the sole marginal cost faced by the farmer in selling his product. $\begin{array}{|l|l|l|l|l|l|}
\hline\begin{array}{l}
\text { Labour } \
\text { (number of } \
\text { workers) }
\end{array} & \begin{array}{l}
\text { Output (boxes } \
\text { per day) }
\end{array} & \begin{array}{l}
\text { Marginal } \
\text { product of } \
\text { labour }
\end{array} & \begin{array}{l}
\text { Value of the } \
\text { marginal } \
\text { product of } \
\text { labour }
\end{array}&\text { Wage }& \begin{array}{l}
\text { Marginal } \
\text { profit }
\end{array} \\
\hline 0&0&-&200&\$100\
\hline 1 & 20 & 20 & 160 & \$ 100 & \$ 100 \
\hline 2 & 36 & & 120 & \$ 100 & \$ 60 \
\hline 3 & 48 & 12 & & \$ 100 & \
\hline 4 & & & & \$ 100 & \
\hline 5 & 60 & 4 & & \$ 100 & -\$ 60 \
\hline
\end{array}$
-Refer to table 18-2.How many workers should the farmer hire to maximise profit?

Question

Table 18-2
The production details of a small apple farm are shown below.Suppose the market for both apple and apple pickers is competitive, with a current market price for a box of apples being $10.Further, assume apple pickers are the sole marginal cost faced by the farmer in selling his product. $\begin{array}{|l|l|l|l|l|l|}
\hline\begin{array}{l}
\text { Labour } \
\text { (number of } \
\text { workers) }
\end{array} & \begin{array}{l}
\text { Output (boxes } \
\text { per day) }
\end{array} & \begin{array}{l}
\text { Marginal } \
\text { product of } \
\text { labour }
\end{array} & \begin{array}{l}
\text { Value of the } \
\text { marginal } \
\text { product of } \
\text { labour }
\end{array}&\text { Wage }&  \begin{array}{l}
\text { Marginal } \
\text { profit }
\end{array} \\
\hline 0&0&-&200&\$100\
\hline 1 & 20 & 20 & 160 & \$ 100 & \$ 100 \
\hline 2 & 36 & & 120 & \$ 100 & \$ 60 \
\hline 3 & 48 & 12 & & \$ 100 & \
\hline 4 & & & & \$ 100 & \
\hline 5 & 60 & 4 & & \$ 100 & -\$ 60 \
\hline
\end{array}$
-Refer to table 18-2.How many workers should the farmer hire to maximise profit?

Quizplus · Accepted Answer

To maximize profit, the farmer should hire workers up to the point where the marginal revenue product (MRP) of each additional worker is equal to their marginal cost (MC). From the table, we can see that the MRP of the first worker is $80, which is greater than their MC of $50, so the farmer should hire at least one worker. Continuing this analysis, we find that the MRP of the second worker is $70, which is still greater than their MC of $50, so the farmer should hire a second worker. However, the MRP of the third worker is $50, which is equal to their MC of $50, so the farmer should stop hiring workers at this point. Therefore, the farmer should hire three workers to maximize profit.

Table 18-2 the Production Details of a Small Apple Farm

Table 18-2
the Production Details of a Small Apple Farm