Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day.
-Refer to Table 18-11. What is the value of the marginal product of the fifth worker?
A)$120
B)$240
C)$300
D)$1,600

Question

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-11. What is the value of the marginal product of the fifth worker?
A)$120 
B)$240 
C)$300 
D)$1,600

Quizplus · Accepted Answer

To calculate the marginal product of labor, we need to calculate the additional output produced by each additional worker.

From the table, we can see that when the fifth worker is added, the total output increases from 900 to 1,140 cupcakes. Therefore, the marginal product of the fifth worker is:

Marginal product of the fifth worker = (Total output with five workers) - (Total output with four workers)
= 1,140 - 900
= 240

Since the cupcakes sell for $3 each, the additional revenue generated by the fifth worker is:

Additional revenue from fifth worker = Marginal product of fifth worker x Price per cupcake
= 240 x 3
= 720

Since the daily wage for each worker is $325, the additional cost incurred by adding the fifth worker is:

Additional cost of fifth worker = Wage per worker
= 325

Therefore, the net benefit of adding the fifth worker is the additional revenue generated minus the additional cost incurred:

Net benefit of fifth worker = Additional revenue from fifth worker - Additional cost of fifth worker
= 720 - 325
= 395

Since the net benefit of adding the fifth worker is positive, it is the best choice for MadeFromScratch, Inc.

Table 18-B Consider the Following Daily Production Data for MadeFromScratch, Inc. MadeFromScratch