Table 18-3

-Refer to Table 18-3.This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor.Each baseball sells for $5 in a competitive market and the firm pays each unit of labor a wage equal to $320 per day.How many units of labor should the firm hire to maximize profit?

Question

Table 18-3
 
-Refer to Table 18-3.This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor.Each baseball sells for $5 in a competitive market and the firm pays each unit of labor a wage equal to $320 per day.How many units of labor should the firm hire to maximize profit?

Quizplus · Accepted Answer

To maximize profit, the firm should produce at the point where the marginal cost (MC) equals the marginal revenue (MR). From the table, we can calculate that the marginal product of labor (MPL) for the fourth worker is 100 baseballs. The marginal cost of producing an additional baseball for the firm is equal to the wage rate divided by the MPL, which yields MC = $3.20. Since the firm sells each baseball for $5, the marginal revenue (MR) is also $5. Thus, the fourth unit of labor should be hired since the MR of an additional worker is greater than the MC of hiring them.

Table 18-3 -Refer to Table 18-3.This Table Describes the Number of Baseballs