Table 10.1
-Refer to Table 10.1. If the price of output is $2 per unit and we observe the firm hiring six workers, if the firm is maximizing profit, the wage rate must be between ________ and ________.

Question

Quizplus · Accepted Answer

Using the data in Table 10.1, we can determine the total cost of production for each level of output. For example, when 6 workers are hired, the total cost is $360. This means that the average cost per unit is $360/60 = $6 per unit. To maximize profit, the firm needs to produce the output level where marginal revenue (MR) equals marginal cost (MC). At an output level of 60 units, MR = $2, which means MC must also equal $2. From the table, we can see that the marginal cost of output is decreasing as more workers are hired, but then starts to increase after 10 workers. This means that the wage rate must be between the point where MC = $2 and the point where MC starts to increase again, which corresponds to a wage rate between $40 and $60. Therefore, the correct answer is C.

Table 10.1 -Refer to Table 10.1. If the Price of Output Is