1. How many workers should the managers hire to maximize economic profit? 2. Calculate the profit for the output selected in part 1. 3. What is the elasticity of supply of workers?
I Collado Lumber Company is producing tons of lumber per day. The following table is the costs of production. The managers currently have six machines. The
See the table below.
|
Number of machines |
Number of workers |
Output |
The marginal product of labor |
VMP |
Wage |
Marginal cost of hiring an additional worker |
|
6 |
0 |
0 |
xxx |
xxx |
$55.00 |
xxx |
|
6 |
1 |
2 |
2 |
$10.00 |
$55.00 |
$55.00 |
|
6 |
2 |
14 |
12 |
$60.00 |
$55.00 |
$55.00 |
|
6 |
3 |
30 |
16 |
$80.00 |
$55.00 |
$55.00 |
|
6 |
4 |
42 |
12 |
$60.00 |
$55.00 |
$55.00 |
|
6 |
5 |
50 |
8 |
$40.00 |
$55.00 |
$55.00 |
|
6 |
6 |
56 |
6 |
$30.00 |
$55.00 |
$55.00 |
|
6 |
7 |
60 |
4 |
$20.00 |
$55.00 |
$55.00 |
|
6 |
8 |
63 |
3 |
$15.00 |
$55.00 |
$55.00 |
|
6 |
9 |
65 |
2 |
$10.00 |
$55.00 |
$55.00 |
|
6 |
10 |
66 |
1 |
$5.00 |
$55.00 |
$55.00 |
Collado Lumber Company uses 6 machines and workers. The machines are the only fixed resources with a fixed cost of $60.
1. How many workers should the managers hire to maximize economic profit?
2. Calculate the profit for the output selected in part 1.
3. What is the elasticity of supply of workers?
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