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The correct option that defines the input level where firm can realize maximum profit.
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Answer to Problem 8MCQ
Option c is correct.
Explanation of Solution
Explanation for correct option:
Given Information:
Number of workers | Total output/hour | Marginal Product | MRP |
1 | 10 | 10 | 20 |
2 | 22 | 12 | 24 |
3 | 30 | 8 | 16 |
4 | 36 | 6 | 12 |
5 | 40 | 4 | 8 |
6 | 43 | 3 | 6 |
7 | 45 | 2 | 4 |
8 | 46 | 1 | 2 |
c.
Profit maximization can be attained by producing until the marginal revenue product (MRP) is greater or becomes equivalent to the wage rates of the labor. In this questions, the wage rates i.e. $8 per hour is equivalent to MRP when 5 workers are hired. Therefore, option c is correct
Explanation for incorrect options:
Since, question is calculation based, all other options except c are incorrect.
Factor of production: Factor of production refers to the components or the resources that are required for producing intangible or tangible products.
Factor income: Factor income refers to returns received by the producer for inserting each factor of production as an input.
Chapter 13R Solutions
Krugman's Economics For The Ap® Course
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