Question

Table 18-12

The table displays data for a small, competitive, profit-maximizing firm that produces and sells envelopes. The time frame is one week.

Labor L	Marginal Product of Labor MPL	Wage W
0 workers
	134 boxes of envelopes	$600
1
	106	$600
2
	92	​$600
3
	84	$600
4
	78	$600
5

Refer to Table 18-12. Suppose the firm sells each box of envelopes that it produces for $7. Suppose also that the firm’s fixed costs amount to $400. How many workers should the firm hire in order to maximize profit, and what is the maximum profit?

a. The firm should hire 2 workers; its maximum profit is $80.

b. The firm should hire 2 workers; its maximum profit is $96.

c. The firm should hire 3 workers; its maximum profit is $96.

d. The firm should hire 3 workers; its maximum profit is $124.

Answer 1