(Table: Workers and Corn Output) Laura is a price-taking farmer who produces corn.Assume the wage rate for workers is $125 and the price per bushel of corn is $10.The table Workers and Corn Output shows Laura's production function.To maximize profits Laura should employ
________ workers.
A)two
B)three
C)four
D)six

Question

Quizplus · Accepted Answer

To maximize profits, Laura should hire workers until the marginal revenue product (MRP) of each worker is equal to the wage rate. When four workers are employed, the MRP of the fourth worker is $500 (40 bushels x $10/bushel), which is equal to the wage rate of $125. Any additional workers would have an MRP of less than $125 and would not increase profits. Therefore, hiring four workers is the optimal choice for Laura to maximize profits.

(Table: Workers and Corn Output) Laura Is a Price-Taking Farmer