Use the following table to answer the following questions:

-If the workers are paid $10 per hour,the price of the product is $4,and the fixed cost of the business is $10,then how many workers should the business employ?
A) three
B) four
C) five
D) six
E) seven

Question

Use the following table to answer the following questions:
 
-If the workers are paid $10 per hour,the price of the product is $4,and the fixed cost of the business is $10,then how many workers should the business employ?
A) three 
B) four 
C) five 
D) six 
E) seven

Quizplus · Accepted Answer

To find the optimal number of workers, we need to calculate the total cost and total revenue and then determine at which point the profit is maximized. 
Total cost = Fixed cost + (Variable cost per unit x Quantity)
Variable cost per unit = (Total labor cost/Total units produced)
Total labor cost = (Number of workers x Hours worked x Hourly rate)
Total units produced = (Number of workers x Hours worked/hour per unit)
Total cost = 10 + [(10h x $10/h)/h + $4/h x (10h/$1)]
Total cost = 10 + $100 + $400
Total cost = $510
Total revenue = Price per unit x Quantity
Quantity = Number of workers x Hours worked/hour per unit
Quantity = 5 x 10/1
Quantity = 50 units
Total revenue = $4 x 50 = $200
Total profit = Total revenue - Total cost
Total profit = $200 - $510
Total profit = -$310 (loss)
Therefore, at 5 workers, the business will incur a loss. Thus, the business should employ fewer workers. The next lower whole number from 5 that results in a positive profit is 4.  So, the business should employ 4 workers to maximize profits.

Use the Following Table to Answer the Following Questions