Omega Custom Cabinets produces and sells custom bathroom vanities. Assume that labor is the only input that varies for the firm. The firm has determined that if it hires 10 workers, it can produce and sell 20 vanities per week. If it hires 11 workers, it can produce and sell 22 vanities per week. It sells each vanity for $800, and it pays each of its workers $1,000 per week. Which of the following is correct?
A)For the 11th worker, the marginal profit is $600.
B)For the 11th worker, the marginal revenue product is $2,000.
C)The firm is maximizing its profit.
D)If the firm is employing 11 workers, then its profit would increase if it cut back to 10 workers.

Question

Quizplus · Accepted Answer

The marginal profit for the 11th worker is calculated by taking the marginal revenue from selling 2 additional vanities ($1,600) and subtracting the cost of the 11th worker ($1,000), resulting in a marginal profit of $600.

Omega Custom Cabinets Produces and Sells Custom Bathroom Vanities