Answer the question on the basis of the following information for Manfred's Shoe Shine Parlor.Assume Manfred hires labor,its only variable input,under purely competitive conditions.Shoe shines are also sold competitively. $\begin{array}{c}
\begin{array}{c}
\text {Units of}\
\underline{\text {Labor}}\
0\
1\
2\
3\
4\
5\
6\
7
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Product}}\
0\
14\
\
30\
35\
39\
\
44
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Product}}\
\
14\
10\
\
\
\
\
2
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Revenue}}\
\
\$ 42 \
\
90\
\
117\
126\
132
\end{array}
\end{array}$
Refer to the given data.If the wage rate is $11,how many workers will Manfred hire to maximize profits?
A) 1.
B) 2.
C) 3.
D) 5.

Question

Answer the question on the basis of the following information for Manfred's Shoe Shine Parlor.Assume Manfred hires labor,its only variable input,under purely competitive conditions.Shoe shines are also sold competitively. $\begin{array}{c}
\begin{array}{c}
 \text {Units of}\
\underline{\text {Labor}}\
0\
1\
2\
3\
4\
5\
6\
7
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Product}}\
0\
14\
\
30\
35\
39\
\
44
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Product}}\
\
14\
10\
\
\
\
\
2
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Revenue}}\
\
\$ 42 \
\
90\
\
117\
126\
132
\end{array}
\end{array}$
  Refer to the given data.If the wage rate is $11,how many workers will Manfred hire to maximize profits?
A) 1.
B) 2.
C) 3.
D) 5.

Quizplus · Accepted Answer

To maximize profits, Manfred will hire workers up to the point where the marginal product of labor (MPL) times the price of the product equals the wage rate. The missing values for Total Product at 2 and 6 workers are 28 and 42, respectively, based on the pattern. The Marginal Product for each worker can be calculated as the change in Total Product. The missing Marginal Products are 16 for the third worker and 4 for the seventh worker. The Total Revenue increases by $12 for each additional shoe shine sold at a constant price of $3 per shoe shine (e.g., $42 for 14 shines, $90 for 30 shines). Manfred will hire workers as long as the value of the marginal product (MPL * Price) is greater than or equal to the wage rate. The wage rate is $11, and the price per shoe shine is $3, so we look for the point where MPL * $3 is greater than or equal to $11. Up to the fifth worker, the value of the marginal product is equal to or greater than the wage rate. Therefore, Manfred will hire 5 workers to maximize profits.

Answer the Question on the Basis of the Following Information