Scenario: A small apple orchard operates in a perfectly competitive output market (the market for apples) and input or factor market (the market for apple pickers). The market price of apples is $1 per pound, and the market wage for apple pickers is $50 per day. See the following table.

-Refer to the scenario above.Now suppose that new apple-picking baskets increase the productivity of apple pickers,as noted in the following table.The new profit-maximizing number of workers to hire is ________.

Question

Scenario: A small apple orchard operates in a perfectly competitive output market (the market for apples) and input or factor market (the market for apple pickers). The market price of apples is $1 per pound, and the market wage for apple pickers is $50 per day. See the following table.
 
-Refer to the scenario above.Now suppose that new apple-picking baskets increase the productivity of apple pickers,as noted in the following table.The new profit-maximizing number of workers to hire is ________.

Quizplus · Accepted Answer

With the introduction of new apple-picking baskets, the productivity of each worker increases. As a result, the marginal product of labor (MPL) increases at each level of employment. A profit-maximizing firm will hire workers until the marginal revenue product (MRP), which is equal to the market price multiplied by the MPL, equals the wage rate. From the table, we can see that the MRP of the 12th worker is $120, which is equal to the wage rate of $50. Therefore, the new profit-maximizing number of workers to hire is 12.

Scenario: a Small Apple Orchard Operates in a Perfectly Competitive