table 16 - 3\nnumber of workers|output of microwave ovens per week\n1|30\n2|55\n3|75\n4|90\n5|100\n6|105\nhot…

table 16 - 3\nnumber of workers|output of microwave ovens per week\n1|30\n2|55\n3|75\n4|90\n5|100\n6|105\nhotspur incorporated, a manufacturer of microwave ovens, is a price - taker in its input and output markets. the firm hires labor at a constant wage rate of $800 per week and sells microwave ovens at a constant price of $80. table 16 - 3 shows the relationship between the quantity of labor it hires and the quantity of microwave ovens it produces. assume that labor is the only variable input.\nrefer to table 16 - 3. what is hotspurs profit maximizing quantity of labor?\n6 workers\n5 workers\n2 workers\n3 workers

table 16 - 3\nnumber of workers|output of microwave ovens per week\n1|30\n2|55\n3|75\n4|90\n5|100\n6|105\nhotspur incorporated, a manufacturer of microwave ovens, is a price - taker in its input and output markets. the firm hires labor at a constant wage rate of $800 per week and sells microwave ovens at a constant price of $80. table 16 - 3 shows the relationship between the quantity of labor it hires and the quantity of microwave ovens it produces. assume that labor is the only variable input.\nrefer to table 16 - 3. what is hotspurs profit maximizing quantity of labor?\n6 workers\n5 workers\n2 workers\n3 workers

Answer

Explanation:

Step1: Calculate marginal product of labor (MPL)

MPL for 2nd worker = 55 - 30 = 25. For 3rd worker = 75 - 55 = 20, for 4th worker = 90 - 75 = 15, for 5th worker = 100 - 90 = 10, for 6th worker = 105 - 100 = 5.

Step2: Calculate value - of - marginal product of labor (VMPL)

VMPL = MPL×price. Since price = $80, VMPL for 2nd worker = 25×80 = $2000, for 3rd worker = 20×80 = $1600, for 4th worker = 15×80 = $1200, for 5th worker = 10×80 = $800, for 6th worker = 5×80 = $400.

Step3: Compare VMPL with wage rate

Wage rate = $800 per week. The firm will hire labor until VMPL≥wage rate. When 5 workers are hired, VMPL = $800 which is equal to the wage rate. Hiring the 6th worker has VMPL = $400 < $800.

Answer:

5 workers