The following table shows data of a firm that produces watches. If the firm's marginal resource cost of labor is constant at $18 per unit of labor, at the profit-maximizing level of output, the firm will hire _____ of labor.
Table 11.5

A)one unit
B)two units
C)three units
D)four units
E)five units

Question

The following table shows data of a firm that produces watches. If the firm's marginal resource cost of labor is constant at $18 per unit of labor, at the profit-maximizing level of output, the firm will hire _____ of labor. ​
Table 11.5
​

A)one unit 
B)two units 
C)three units 
D)four units 
E)five units

Quizplus · Accepted Answer

To determine the profit-maximizing level of output, we need to compare the marginal revenue (MR) and marginal cost (MC) of producing an additional unit of output.

From the table, we can see that the MR of producing the first three units is greater than the MC of producing those units. However, the MR of producing the fourth and fifth units is less than the MC of producing those units.

Therefore, the profit-maximizing level of output is three units. To produce these three units, the firm will need to hire three units of labor, since the marginal resource cost of labor is constant at $18 per unit of labor.

The Following Table Shows Data of a Firm That Produces