Question

Suppose that the wage rate is $30 per hour, and the firm sells each unit of output for $6. Using the data from Table 7.3, how many units of labor will the firm hire?

a.2 units
b.3 units
c.4 units
d.5 units

3 unite is incorrect!

Answer 1

I found this data from Table 7.3
Labor Input Output
0 0
1 40
2 70
3 90
4 100
5 105
6 108

Labor Cost = Labor Input x 30
Output Sales = Output x 6
Revenue = Sales - Cost

Labor cost Output Sales
0 0
30 240
60 420
90 540
120 600
150 630
180 648

Labor Input Output Labor cost Output Sales Revenue
0 0 0 0 0
1 40 30 240 210
2 70 60 420 360
3 90 90 540 450
4 100 120 600 480
5 105 150 630 480
6 108 180 648 468

Labor Unit 4 and 5 both have a revenue of 480. It is the maximum revenue. I think the best option would be C. 4 UNITS.

Lesser cost to the company at a maximum revenue.