4. Profit maximization Consider Live Happley Fields, a small player in the straw

Question

4. Profit maximization Consider Live Happley Fields, a small player in the strawberry business whose production has no individual effect on wages and prices. Live Happley's production schedule for strawberries is given in the following table: Output (Pounds of strawberries) Labor (Number of workers) 18 34 48 60 70 Suppose that the market wage for strawberry pickers is $170 per worker per day, and the price of strawberries is $12 per pound. On the following graph, use the blue points (circle symbol) to plot Live Happley's lab Session 54:33

Explanation / Answer

According to Profit maximization condition, Happley will charge till

P*MPL = W

Price*Marginal Product of Labour >= Wage

12*MPL >= $170

MPL >= 170/12 = 14.16

So, At given price of $12 Happley should hire 2 Workers

Now let's look at price for P = $16

16*MPL >= $170

MPL >= 170/16 = 10.625

So , At given price of $16 Happley should hire 4 Workers

3. Supply of, Increase

For Wage = $200

16*MPL >= $200

MPL >= 2000/16 = 12.5

So Happely will hire 3 Workers

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Labour Output MPL P*MPL 0 0 0 0 1 18 18 216 2 34 16 192 3 48 14 168 4 60 12 144 5 70 10 120

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