(Table: Employment and Output) In the table Employment and Output, if the price of a bushel of wheat is $10 and the price of labor (wage) is $120, then the profit-maximizing quantity of labor is:
A)one.
B)three.
C)four.
D)six.

Question

(Table: Employment and Output) In the table Employment and Output, if the price of a bushel of wheat is $10 and the price of labor (wage) is $120, then the profit-maximizing quantity of labor is:
A)one. 
B)three. 
C)four. 
D)six.

Quizplus · Accepted Answer

The profit-maximizing quantity of labor is where Marginal Revenue Product (MRP) of labor equals the wage rate. From the table, we can see that at four units of labor, MRP is $480 ($140 + $120 + $110 + $110) and the wage rate is $120. Thus, the profit-maximizing quantity of labor is four.

(Table: Employment and Output) in the Table Employment and Output