Question

1) Quantity (2) Quantity (3) Product (4) Marginal (5) Marginal of Factor X of Output Price Physical Product Revenue Product O 20 $24 1 28 $24 (c) 2 34 $24 (A) (D) 3 37 $24 (B) (E) 4 38 $24 (E) If firm is a factor price taker and ongoing price of Factor X is $20, how many units of Factor X this firm should hire to maximize profit? O 2 4 O 1 3

Answer 1

Units	Q	Price	Marginal Physical Product	Marginal Revenue Product
0	20	24	-	-
1	28	24	8	192
2	34	24	6	144
3	37	24	3	72
4	38	24	1	24

TR = P*Q

= 480, 672, 816, 888, 912

At X = 4, VMPx = 24

Quantity of X will be hired when VMPx $\geq$ Px

It is given Px = 20

So, till 4 units of X, VMPx $\geq$ Px

Hence, 4 units of Factor X will be hired.

Option 2nd is correct

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