Zowie! Surfboards has the following production function: $$\begin{array} { c c }
\begin{array} { c }
\text { Number of } \
\text { Workers }
\end{array} & \begin{array} { c }
\text { Number of } \
\text { Surfboards Produced }
\end{array} \
\hline 1 & 12 \
2 & 21 \
3 & 29 \
4 & 36 \
5 & 42 \
\hline
\end{array}$$ If surfboards sold for $30 and the nominal wage rate was $200, how many workers would the firm employ?
A) 2
B) 3
C) 4
D) 5

Question

Zowie! Surfboards has the following production function: $$\begin{array} { c c } 
\begin{array} { c } 
\text { Number of } \
\text { Workers }
\end{array} & \begin{array} { c } 
\text { Number of } \
\text { Surfboards Produced }
\end{array} \
\hline 1 & 12 \
2 & 21 \
3 & 29 \
4 & 36 \
5 & 42 \
\hline
\end{array}$$ If surfboards sold for $30 and the nominal wage rate was $200, how many workers would the firm employ?
A) 2
B) 3
C) 4
D) 5

Quizplus · Accepted Answer

The firm will employ workers until the marginal product of labor times the price of the product equals the wage rate. The marginal product of the 4th worker is 7 surfboards (36-29), and 7*30 = $210, which is greater than the wage rate of $200. The marginal product of the 5th worker is 6 surfboards (42-36), and 6*30 = $180, which is less than the wage rate. Thus, the firm will employ 4 workers.

Zowie! Surfboards Has the Following Production Function If Surfboards Sold for $30 and the Nominal Wage Rate