Classic Oak receives $200 for every table it sells. This production function sho
ID: 1202595 • Letter: C
Question
Classic Oak receives $200 for every table it sells. This production function shows the relationship between number of workers employed and number of tables produced each week.
A.When Classic Oak hires two workers rather than one, what is the marginal physical product of the second worker, measured in tables per week?
B. How much additional revenue does Classic Oak receive if it increases employment from two workers to three workers?
C. If Classic Oak must pay each worker a market wage of $520 per week, how many workers should the company hire to maximize profit?
Explanation / Answer
A. When Classic Oak hires two workers rather than one, what is the marginal physical product of the second worker is 5.
B. $800 (i.e. $3000 - $200)
C. 4 workers (At 4 no. workers profit is maximum, i.e. $1520)
Employees Table per week marginal physical product Price per table($) TR MR Price per worker($) TC MC Profit 0 0 - 200 0 - 520 0 - 0 1 6 6 200 1200 1200 520 520 520 680 2 11 5 200 2200 1000 520 1040 520 1160 3 15 4 200 3000 800 520 1560 520 1440 4 18 3 200 3600 600 520 2080 520 1520 5 20 2 200 4000 400 520 2600 520 1400