The following table shows employment and production of loaves of bread at a bakery. The owner of the bakery pays workers...
The following table shows employment and production of loaves of bread at a bakery. The owner of the bakery pays workers $100 per day and each of loaf of bread produced sells for $1. Given the table below, if the goal of the owner is to maximize economic profits, how many workers will he/she hire?
|
Number of bakers per day |
Loaves of bread per day |
|
0 |
0 |
|
1 |
400 |
|
2 |
700 |
|
3 |
900 |
|
4 |
1,025 |
|
5 |
1,100 |
|
6 |
1,150 |
Homework Answers
MPL = Change in output per labor
VMPL = MPL * P
| Labor | Output | MPL | VMPL |
| 0 | 0 | 0 | 0 |
| 1 | 400 | 400 | 400 |
| 2 | 700 | 300 | 300 |
| 3 | 900 | 200 | 200 |
| 4 | 1025 | 125 | 125 |
| 5 | 1100 | 75 | 75 |
| 6 | 1150 | 50 | 50 |
As untill 4th labor VMPL > Wage rate, therefore firm will hire 4 labors/bakers
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