Question

Harold Brown runs a company that sells encyclopedia sets for $250. The following schedule indicates the number of sets per week that are sold as employment increases. 4 5 6 8 9 Number of employees Total Sets Sold 7 43 25 32 38 47 50 If Brown's costs increase by $1,300 per week as additional workers are employed, how many workers should be employed in order to maximize profit? b.si o teight Od seven

Answer 1

Number of Employees	Total Sets Sold	Marginal Product of Labour	Marginal Revenue Product of Labour @$250
4	25
5	32	7	1750
6	38	6	1500
7	43	5	1250
8	47	4	1000
9	50	3	750

Firms should hire additional units of a resource as long as the marginal revenue product of the resource exceeds (up to the level/point where MRP=MFC) the cost of an additional unit of the resource

Till 6 th Unit Marginal Revenue Product of Labour exceeds the Cost of additional worker as for 6th unit Marginal Revenue Product of Labour isv$1500 and it is more than Cost of Additional Worker which is $1300.

So, Six workers should be Employed to maximize profit.

Option B is correct Option.