Use the following to answer questions 40-42:
Figure 13.5
-(Figure 13.5) The figure represents a labor union with wage in dollars and quantity of labor in hundreds of hours. If the labor union chooses to maximize profit, how many workers will it supply?
A) 2,750
B) 4,000
C) 5,000
D) 8,000

Question

Use the following to answer questions 40-42:
Figure 13.5 
-(Figure 13.5) The figure represents a labor union with wage in dollars and quantity of labor in hundreds of hours. If the labor union chooses to maximize profit, how many workers will it supply?
A) 2,750 
B) 4,000 
C) 5,000 
D) 8,000

Quizplus · Accepted Answer

The profit-maximizing quantity of labor is where marginal revenue equals marginal cost. In this case, marginal revenue is equal to the wage rate, and marginal cost is equal to the slope of the supply curve. The supply curve is upward sloping, so marginal cost is positive. Therefore, the profit-maximizing quantity of labor is where the wage rate equals the slope of the supply curve. In this case, the wage rate is $10 per hour, and the slope of the supply curve is $2 per hour. Therefore, the profit-maximizing quantity of labor is 5,000 hours.

Use the Following to Answer Questions 40-42