Question

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. the farmer's product sells for $3 per unit, and the wage rate is $13 per worker. what is the farmer's profit-maximizing output

Answer 1

Answer:

37 units.

Explanation:

The computation of farmer's profit-maximizing output is shown below:-

Worker     TP       MP     TC of worker    TR = TP × 3     Profit

1                24                         13                  72                  59

2               32       8               26                 96                  70

                         (32 - 28)

3               37       5                39                  111                  72

                          (37 - 32)

4               40       3                 52                 120                68

                           (40 - 37)

Marginal Product is the Additional Product Change when an extra worker is working.

Profit is maximized at 3 units of worker and TP is 37 units.