Table 12.3 Hotspur Incorporated, a manufacturer of microwave ovens, is a price taker in its input and output markets.The firm hires labour at a constant wage rate of $800 per week and sells microwave ovens at a constant price of $80.Table 12.3 shows the relationship between the quantity of labour it hires and the quantity of microwave ovens it produces.
-Refer to Table 12.3.Hotspur's profit-maximising quantity of labour is

Question

Table 12.3  Hotspur Incorporated, a manufacturer of microwave ovens, is a price taker in its input and output markets.The firm hires labour at a constant wage rate of $800 per week and sells microwave ovens at a constant price of $80.Table 12.3 shows the relationship between the quantity of labour it hires and the quantity of microwave ovens it produces.
-Refer to Table 12.3.Hotspur's profit-maximising quantity of labour is

Quizplus · Accepted Answer

To determine the profit-maximizing quantity of labour, we need to find the level of labour where the marginal revenue product (MRP) of labour equals the wage rate. From the table, we can see that at 5 workers, the MRP is $800 which is equal to the wage rate of $800. At this level of labour, the firm is maximizing its profits. Any additional workers would increase total output, but would not contribute enough to revenue to cover their wage cost, resulting in lower profits. Therefore, the best choice is 5 workers.

Table 123 Hotspur Incorporated, a Manufacturer of Microwave Ovens, Is