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-(Table: Total Product of Labor at Debbie's Bakery) Look at the table Total Product of Labor at Debbie's Bakery. Debbie can sell cakes at $10 each. If Debbie must pay each worker $40 per day, how many workers will she hire to maximize profit?
A) three
B) four
C) five
D) six

Question

Use the following to answer questions: 
-(Table: Total Product of Labor at Debbie's Bakery) Look at the table Total Product of Labor at Debbie's Bakery. Debbie can sell cakes at $10 each. If Debbie must pay each worker $40 per day, how many workers will she hire to maximize profit?
A) three 
B) four 
C) five 
D) six

Quizplus · Accepted Answer

To maximize profit, Debbie should hire workers up to the point where the marginal revenue product (MRP) of labor equals the wage rate. The MRP is the additional revenue generated by hiring one more worker. If each cake sells for $10, calculate the MRP for each additional worker and compare it to the $40 wage. Hiring five workers maximizes profit as the MRP of the fifth worker is still greater than or equal to $40, but the MRP of the sixth worker would be less than $40.

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