Final answer:
To determine how many widgets a firm should produce at a market price of $10, we look at the cost of production and revenue generated. The inconsistency in revenue information needs clarification, but if widgets sell at $4 and workers cost $10 per hour, the firm wouldn't produce any widgets unless the proper market price is $10, which would imply maximizing widget production due to the $6 profit per widget (assuming no additional costs).
Step-by-step explanation:
If the market price is $10, to determine how many widgets a profit-maximizing firm should produce, we need to analyze the cost of production and the revenue generated. First, since a worker can produce two widgets per hour and each widget can be sold for four dollars, the revenue per worker per hour is eight dollars. If widget workers are paid ten dollars per hour, then each worker employed creates a cost of ten dollars per hour for the firm. To maximize profits, the firm should continue to produce until the marginal cost of production is equal to the marginal revenue from sales.
However, the revenue per widget in the question contradicts the previously provided information. If the widget is sold for four dollars, then the worker generates eight dollars per hour for the firm, not $10 as per the market price stated in the initial question. This inconsistency must be clarified. Assuming the correct selling price is $4 per widget, the firm would not employ workers at a loss, so the number of widgets produced would be zero at the market price of ten dollars, because the firm would be incurring a loss of two dollars per widget produced (cost of $10 per hour divided by production of 2 widgets per hour minus revenue of $8).
To calculate the profit-maximizing output level, one would typically subtract the total cost from total revenue for each possible level of output and choose the level of output with the highest profit. However, with the given information, and assuming the market price of $10 refers to the selling price of widgets, the firm should produce and sell as many widgets as possible because they would be making a profit of $6 per widget ($10 market price - $4 cost per widget). Nevertheless, this calculation is based purely on variable costs and does not take into account fixed costs or the possibility of changing costs at different levels of output.