The following table provides information for Harry's Hammers,a firm that hires labor competitively and sells hammers for $50 each in a competitive price-taker market.

If the market wage rate is $225 per week,how many units of labor would a profit-maximizing firm employ?
A)4
B)5
C)6

Question

The following table provides information for Harry's Hammers,a firm that hires labor competitively and sells hammers for $50 each in a competitive price-taker market.

If the market wage rate is $225 per week,how many units of labor would a profit-maximizing firm employ?
A)4 
B)5 
C)6

Quizplus · Accepted Answer

To determine the profit-maximizing level of labor, we need to find the point where the marginal revenue product (MRP) is equal to the wage rate. In this case, MRP is given by the column "Value of Marginal Product (VMP)." At 6 units of labor, the VMP is $225, which is equal to the wage rate. Thus, the profit-maximizing firm would hire 6 units of labor. At 5 units of labor, the VMP is $200, which is less than the wage rate, and at 7 units of labor, the VMP is $210, which is also less than the wage rate. Therefore, the best choice is C.

The Following Table Provides Information for Harry's Hammers,a Firm That