(Table: Value of the Marginal Product of Labor and Demand) In the figure Value of the Marginal Product of Labor and Demand, the total product of labor is shown for the hourly production of power cords.If the price of a power cord is $4 and the wage rate is $160 per hour, the profit- maximizing quantity of labor is worker(s).
A)zero
B)one
C)three
D)five

Question

Quizplus · Accepted Answer

The profit-maximizing quantity of labor is where the value of the marginal product of labor is equal to the wage rate. From the graph, this occurs at the point where the VMPL intersects with the horizontal line representing the wage rate. This occurs at a quantity of 3 workers. Any more workers would result in the VMPL being less than the wage rate, leading to negative profits. Therefore, the best choice is three workers.