Consider the following chart If the wage rate is dollar 25/worker-day, the profi

Question

Consider the following chart If the wage rate is dollar 25/worker-day, the profit-maximizing firm will hire workers and make in profit. 5 workers, dollar 405 6 workers. dollar 415. 7 workers, dollar 465. 5 workers, zero dollars. In the language we use to describe the income-expenditure model, au­tonomous means: that something runs on auto-pilot. that a variable is exogenous. that a variable is controlled by some agency of the government. that a variable is endogenous. An account statement for a bank that shows the sources of its funds and the uses of its funds is called: a bank's balance sheet. a bank's income statement. a bank's profit report. a person's checking account.

Explanation / Answer

Q8. A profit-maximizing firm hires labor upto that point at which marginal revenue product (MRP) equals wage rate or MRP is greater than wage rate. Also, further increase in labor beyond that point result in wage rate becoming greater than MRP.

The table clearly shows that upto hiring of 5 worker-days, MRP is greater than wage rate. Hiring of 6th worker-day results in wage rate becoming greater than MRP.

So, if wage rate is $25 per worker-day, the profit-maximizing firm will hire 5 workers.

Calculate Profit -

Calculate Total Cost -

Number of worker-days hired = 5 worker-days

Wage rate = $25 per worker-day

Total cost = 5 * 25 = $125

Calculate Total revenue -

Output produced using 5 worker-days = 53 units

Price per unit = $10

Total Revenue = 53 units * $10 per unit = $530

Profit = Total revenue - Total Cost = $530 - $125 = $405

The firm will make profit of $405.

Hence, the correct answer is option (a).

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