Carolyn's Pottery Shop produces vases that sell for $15 each. Assume that labor is the only input that varies for the firm. If Carolyn hires 10 workers, she can produce and sell 500 vases per week. If she hires 11 workers, she can produce and sell 560 vases per week. Carolyn pays each of her workers $400 per week. Which of the following is correct?
A)For the 11th worker, the marginal profit is $500.
B)For the 11th worker, the marginal revenue product is $500.
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 as the additional revenue from selling 60 more vases (60 x $15 = $900) minus the cost of hiring the 11th worker ($400), resulting in a marginal profit of $500.

Carolyn's Pottery Shop Produces Vases That Sell for $15 Each