Managerial economic help please! Coastal Productions has 3 fully equipped studio
ID: 1191482 • Letter: M
Question
Managerial economic help please!
Coastal Productions has 3 fully equipped studios with assorted types of video and audio equipment, so that the supply of capital is fixed at K = 3 capital units per month. The wage rate for workers is given to be w = $7,000 per month. The average price of its master audio and video master recordings is P = $125. The quantity of master recordings per month is given by Q.
1. In order to maximize profit, how much labor should the firm hire?
A. L = 6 full-time workers
B. L = 7.5 full-time workers
C. L = 8 full-time workers
D. L = 9.5 full-time workers
E. L = 11 full-time workers
K*
L
D L
Q
MPL
APL
0
0
1
10
2
54
3
125
4
205
5
281
6
350
7
412
8
464
9
500
10
520
11
522
12
515
K*
L
D L
Q
MPL
APL
0
0
1
10
2
54
3
125
4
205
5
281
6
350
7
412
8
464
9
500
10
520
11
522
12
515
Explanation / Answer
the firm should employ 8 units if labor, since post employing 8 units of labor, the total revenue becomes < the toal cost. Hence it is unprofitable to employ any further labor.
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