The table above shows the total product schedule for Shines Car Wash. The market for car washes is perfectly competitive and car washes sell for $5 each. The labor market is competitive and the wage rate is $50 per day
What is the value of marginal product for each worker? How many workers does the firm hire to maximize profit?
Quantity of labor
(workers) Cars washed
(cars per day) Value of marginal product
(dollars per day)
1 8
2 23 75
3 33 50
4 40 35
5 45 25
The value of marginal product is the marginal product multiplied by the price of a car wash. The value of marginal product schedule is given in the table above. To maximize its profit, when the wage rate is $50 per day, Shines Car Wash hires 2 workers because at this point the value of marginal product equals the wage rate.
You might also like to view...
Refer to Figure 23.1. If the company moves from Level II to Level III, then the additional costs are:
A. $250. B. $135. C. $845. D. $115.
Dana spends $10,000 on remodeling a storefront that she then opens as a shoe store. The business has not been very successful, and she needs an additional $3,000 to keep the shoe store open. Which of the following is true?
A. The $3,000 represents her marginal costs of production. B. The $3,000 Dana needs to keep the deli open represents her total fixed costs. C. The $10,000 Dana spent on remodeling represents a part of the total variable cost of her business. D. The $10,000 Dana spent on remodeling is a fixed cost of her business.