Use the following to answer question:
-(Table: Workers and Corn Output)Use Table: Workers and Corn Output.Laura is a price-taking farmer who produces corn.Assume that the wage rate for workers is $125 and the price per bushel of corn is $10.Suppose that Laura is employing 7 workers.If she reduces employment to 6 workers,her profits will:
A)increase by $20.
B)decrease by $970.
C)increase by $105.
D)increase by $90.

Question

Use the following to answer question: 
-(Table: Workers and Corn Output)Use Table: Workers and Corn Output.Laura is a price-taking farmer who produces corn.Assume that the wage rate for workers is $125 and the price per bushel of corn is $10.Suppose that Laura is employing 7 workers.If she reduces employment to 6 workers,her profits will:
A)increase by $20. 
B)decrease by $970. 
C)increase by $105. 
D)increase by $90.

Quizplus · Accepted Answer

With 7 workers, the output is 140 bushels, and with 6 workers, it's 130 bushels. The difference in output is 10 bushels, which at $10 per bushel equals $100. Reducing employment saves $125 in wages. So, the total increase in profit is $100 (from saved output value) + $125 (saved wages) - $120 (lost revenue from 10 bushels) = $105.

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