A bakery producing bread reports the following production information:
# Workers Total Product
(loaves of bread per hour)
0 0
1 35
2 65
3 85
4 100
5 110
The bread sells in a competitive market at a price of $0.30 each. The firm hires workers in a competitive labor market at a wage of $7 per hour. How many workers should the firm hire? Explain your answer.
The firm should hire two workers. The marginal revenue product of the second worker is $9 (30 x $0.30), which is greater than the wage of $7 . However, the marginal revenue product of the third worker is only $6 (20 x $0.30), which is less than the wage.
You might also like to view...
What is meant by the term "outside lags"?
What will be an ideal response?
In the long run, a perfectly competitive firm
A) can make either an economic profit or a normal profit. B) incurs an economic loss. C) makes zero economic profit. D) can make an economic profit, zero economic profit, or incur an economic loss. E) makes an economic profit.