Q1 ) Suppose that the Fuzzy Wuzzy Wuzza Company has the production function abov

Question

Q1 ) Suppose that the Fuzzy Wuzzy Wuzza Company has the production function above for producing stuffed bears. If the company wants to maximize profit, what is the maximumamount that the firm should pay the 7th worker per hour?

1) $84

2) $252

3) $15

4) $3

Q2)

Suppose that the Fuzzy Wuzzy Wuzza Company has the production function above for producing stuffed bears. What is the value of the marginal product of the 4th worker?

1) $11 per hour
2) $186 per hour
3) $ 62 per hour
4) $ 33 per hour

Q3) Suppose that the Fuzzy Wuzzy Wuzza Company has the production function above for producing stuffed bears. If the market wage is $32.50 per hour, how many workers should Fuzzy Wuzzy Wuzza hire per hour in order to maximize its profits?

1) 2 workers

2) 3 workers

3) 4 workers

4) 5 workers

Labor input Total Product Price (workers per hour) (bears/hour) ($/bear) 0 19 36 51 62 72 79 84

Explanation / Answer

Question 1). Answer :- Option 2). $ 252

Explanation :- Maximum amount to be paid to seventh worker by firm = 84 * 3

= $ 252.

Question 2). Answer :- Option 1). $ 11 per hour.

Explanation :- Marginal product value of fourth worker = 62 - 51

= $ 11 per hour.

Question 3). Answer :- Option 3). 4 workers.

Explanation :-

Fuzzy Company will hire 4 workers per hour so as to maximize its profits because the Marginal revenue product (MRP) equals to Marginal cost (MC) amounting to $ 33 (approx) on hiring the four workers by Fuzzy company.

Note :- Total cost = Labor input * 32.50

Labor input Total revenue product Marginal revenue product (MRP) Total cost Marginal cost (MC) 0 0 - 0 - 1 57 (19 * 3) 57 (57 - 0) 32.50 32.50 2 108 (36 * 3) 51 (108 - 57) 65.00 32.50 3 153 (51 * 3) 45 (153 - 108) 97.50 32.50 4 186 (62 * 3) 33 (186 - 153) 130.00 32.50 5 216 (72 * 3) 30 (216 - 186) 162.50 32.50 6 237 (79 * 3) 21 (237 - 216) 195.00 32.50 7 252 (84 * 3) 15 (252 - 237) 227.50 32.50

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