Table 18-2
Consider the following daily production data for Davis Golf Balls, Inc. Davis Golf Balls, Inc. sells golf balls for 50 cents each and pays the workers a wage of $30 a day.

-Refer to Table 18-2.Assuming Davis Golf Balls,Inc.is a competitive,profit-maximizing firm,how many workers will the firm hire?

Question

Table 18-2
Consider the following daily production data for Davis Golf Balls, Inc. Davis Golf Balls, Inc. sells golf balls for 50 cents each and pays the workers a wage of $30 a day.
 
-Refer to Table 18-2.Assuming Davis Golf Balls,Inc.is a competitive,profit-maximizing firm,how many workers will the firm hire?

Quizplus · Accepted Answer

To determine the profit-maximizing level of workers, we need to find the point where the marginal product of labor (MPL) equals the wage rate. From the given production data, we can calculate MPL as the change in output divided by the change in the number of workers. The table shows that MPL increases up to 4 workers before decreasing at 5 workers. At 4 workers, MPL is 320/4 = 80, which is greater than the wage rate of $30. At 5 workers, MPL is 288/5 = 57.6, which is less than the wage rate. Therefore, the profit-maximizing level of workers for Davis Golf Balls, Inc. is 5 workers. At this level, the firm can produce 360 golf balls ($180 in revenue) at a cost of $150 (wages of $30 per worker x 5 workers), resulting in a profit of $30.

Table 18-2 Consider the Following Daily Production Data for Davis Golf Balls