Question

In the short​ run, a tool manufacturer has a fixed amount of capital. Labor is a variable input. The cost and output structure that the firm faces is depicted in the following table.

Suppose that for the​ firm, the goods market is perfectly competitive. The market price of the product is ​$4 at each quantity supplied by the firm.  

Labor Supplied	Total Physical Product	Hourly Wage Rate​ ($)	Total Wage Cost	Marginal Factor Cost
10	100	5	50	−
11	109	6	66	16
12	116	7	84	18
13	121	8	104	20
14	124	9	126	22
15	125	10	150	24

What is the amount of labor that this​ profit-maximizing firm will​ hire? __ workers. ​(Enter a numeric response using an​ integer.)

Answer 1

L	TP	MP= change in TP	Marginal revenue product = (MR)(MP)= P(MP)= 4(MP)	W	Total wage cost	Marginal factor cost
10	100	-	0	5	50	-
11	109	9	36	6	66	16
12	116	7	27	7	84	18
13	121	5	20	8	104	20
14	124	3	12	9	126	22
15	125	1	4	10	150	24

The profit maximization condition is where MRP = MFC.

So, the profit maximizing firm will hire 13 workers .