(Table: Employees and Artisanal Carpets) Use Table: Employees and Artisanal Carpets. Suppose that you achieve your dream of opening an artisanal studio specializing in the production of hand-woven carpets. You pay $10 in fixed costs for equipment and $9 per day to each of your artists (employees) who make the carpets. If the industry is perfectly competitive, and the current market price is $1, how many artists should you employ? $$\text { Table: Employees and Artisanal Carpets } \
\begin{array} { | l | l | }
\hline \begin{array} { l }
\text { Number of } \
\text { Employees (artists) }
\end{array} & \text { Output (carpets) } \
\hline 1 & 10 \
\hline 2 & 25 \
\hline 3 & 35 \
\hline 4 & 43 \
\hline 5 & 48 \
\hline
\end{array}$$

Question

(Table: Employees and Artisanal Carpets) Use Table: Employees and Artisanal Carpets. Suppose that you achieve your dream of opening an artisanal studio specializing in the production of hand-woven carpets. You pay $10 in fixed costs for equipment and $9 per day to each of your artists (employees) who make the carpets. If the industry is perfectly competitive, and the current market price is $1, how many artists should you employ? $$\text { Table: Employees and Artisanal Carpets } \
\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Number of } \
\text { Employees (artists) }
\end{array} & \text { Output (carpets) } \
\hline 1 & 10 \
\hline 2 & 25 \
\hline 3 & 35 \
\hline 4 & 43 \
\hline 5 & 48 \
\hline
\end{array}$$

Quizplus · Accepted Answer

In a perfectly competitive market, the goal is to maximize profit or minimize losses. To determine the optimal number of artists to employ, calculate the marginal revenue product (MRP) of each artist and compare it to their wage ($9). MRP is the additional revenue generated by employing one more artist, calculated as the additional output multiplied by the market price ($1). The calculation stops when MRP is less than or equal to the wage. For the first artist, MRP = $(10 - 0) * $1 = $10. For the second artist, MRP = $(25 - 10) * $1 = $15. For the third artist, MRP = $(35 - 25) * $1 = $10. For the fourth artist, MRP = $(43 - 35) * $1 = $8. Since the MRP for the fourth artist ($8) is less than the wage ($9), you should employ 3 artists, where the MRP equals or is just above the wage cost.