Zowie! Surfboards has the following production function:
$$\begin{array} { c c }
\begin{array} { c }
\text { Number of } \
\text { Workers }
\end{array} & \begin{array} { c }
\text { Number of } \
\text { Surfboards Produced }
\end{array} \
\hline 1 & 12 \
2 & 21 \
3 & 29 \
4 & 36 \
5 & 42 \
\hline
\end{array}$$
If surfboards sold for $30 and the nominal wage rate was $200,how many workers would the firm employ?
A)2
B)3
C)4
D)5

Question

Zowie! Surfboards has the following production function:
$$\begin{array} { c c } 
\begin{array} { c } 
\text { Number of } \
\text { Workers }
\end{array} & \begin{array} { c } 
\text { Number of } \
\text { Surfboards Produced }
\end{array} \
\hline 1 & 12 \
2 & 21 \
3 & 29 \
4 & 36 \
5 & 42 \
\hline
\end{array}$$
If surfboards sold for $30 and the nominal wage rate was $200,how many workers would the firm employ?
A)2
B)3
C)4
D)5

Quizplus · Accepted Answer

The firm will employ workers until the marginal revenue product (MRP) equals the wage rate. MRP is the additional revenue from hiring one more worker. At 4 workers, MRP is $210 (7 surfboards x $30), which is closest to the $200 wage rate.

Zowie! Surfboards Has the Following Production Function If Surfboards Sold for $30 and the Nominal Wage Rate