The table below shows the total production for varying numbers of hours worked producing yo- yos.The firm sells its product and hires its workers in competitive markets. $$\begin{array} { | c | c | c | c | }
\hline \begin{array} { c }
\text { Number of } \
\text { Hours Worked }
\end{array} & \begin{array} { c }
\text { Number of } \
\text { Yo-Yos } \
\text { Produced }
\end{array} & \begin{array} { c }
\text { Wage Rate } \
\text { per Hour } ( \$ )
\end{array} & \begin{array} { c }
\text { Price of Yo- Yos } \
( \$ )
\end{array} \
\hline 10 & 60 & 10 & 5 \
\hline 11 & 70 & 10 & 5 \
\hline 12 & 78 & 10 & 5 \
\hline 13 & 84 & 10 & 5 \
\hline 14 & 88 & 10 & 5 \
\hline 15 & 90 & 10 & 5 \
\hline
\end{array}$$ TABLE 13- 4
-Refer to Table 13- 4.If the market price of yo- yos drops to $2.50,how many worker- hours should this profit- maximizing firm hire?
A)15
B)11
C)14
D)12
E)13

Question

The table below shows the total production for varying numbers of hours worked producing yo- yos.The firm sells its product and hires its workers in competitive markets. $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Number of } \
\text { Hours Worked }
\end{array} & \begin{array} { c } 
\text { Number of } \
\text { Yo-Yos } \
\text { Produced }
\end{array} & \begin{array} { c } 
\text { Wage Rate } \
\text { per Hour } ( \$ )
\end{array} & \begin{array} { c } 
\text { Price of Yo- Yos } \
( \$ )
\end{array} \
\hline 10 & 60 & 10 & 5 \
\hline 11 & 70 & 10 & 5 \
\hline 12 & 78 & 10 & 5 \
\hline 13 & 84 & 10 & 5 \
\hline 14 & 88 & 10 & 5 \
\hline 15 & 90 & 10 & 5 \
\hline
\end{array}$$ TABLE 13- 4
-Refer to Table 13- 4.If the market price of yo- yos drops to $2.50,how many worker- hours should this profit- maximizing firm hire?
A)15
B)11
C)14
D)12
E)13

Quizplus · Accepted Answer

The profit-maximizing firm will hire workers up to the point where the marginal revenue product of labor (MRPL) equals the wage rate. The MRPL is the change in total revenue divided by the change in the number of workers. In this case, the MRPL is equal to the price of a yo-yo times the marginal product of labor (MPL). The MPL is the change in the number of yo-yos produced divided by the change in the number of workers.From the table, we can see that the MPL is 6 yo-yos per worker. The price of a yo-yo is $2.50. Therefore, the MRPL is $15.00. The wage rate is $10.00. Therefore, the profit-maximizing firm will hire 14 workers.

The Table Below Shows the Total Production for Varying Numbers