Consider the case of Eastover Coal Mining Company, operating its mine in the small, isolated town of Eastover, Kentucky. The data in the table describe the firm, where MP_L= marginal product of labor and MRC_L= marginal resource cost of labor. If the firm sells its coal in a purely competitive market for $10 per ton, how many laborers should it hire? $\begin{array} { | c | c | c| } \hline\text { Nuriber of } & \text { MPL (Tons of } & \text { MRGL } \ \text { Labores } & \text { Coal) } & \ \hline 1 & 10 & \$ 20 \ \hline 2 & 7 & 30 \ \hline 3 & 5 & 55 \ \hline 4 & 4 & 90 \ \hline 5 & 3.5 & 120\ \hline \end{array}$ A) 2 B) 3 C) 4 D) 5

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Quizplus · Accepted Answer

The firm should hire laborers until the marginal revenue product (MRP) equals the marginal resource cost (MRC). MRP is calculated as MPL multiplied by the price of coal ($10). For 2 laborers, MRP = 7 * $10 = $70, which is greater than MRC ($30). For 3 laborers, MRP = 5 * $10 = $50, which is less than MRC ($55). Therefore, the firm should hire 2 laborers.

Consider the Case of Eastover Coal Mining Company, Operating Its