A firm's labor input, total output of labor, and product price schedules are given below. If...
Question:
A firm's labor input, total output of labor, and product price schedules are given below. If labor is the only variable input, how much labor should the firm employ if the wage rate is $8 per day?
| Units of labor | Total output per day | Price of good |
|---|---|---|
| 2 | 10 | $10 |
| 3 | 14 | $9 |
| 4 | 19 | $8 |
| 5 | 23 | $7 |
| 6 | 27 | $6 |
| 7 | 31 | $5 |
Labor and Profit Maximization
Labor is a variable cost of production. Other variable costs in production are the quantity of labor, capital, rent and wage rates. When firms maximize profit the cost function can be derived in numerous ways. Some firms derive the total costs as a function of labor and other firms derive the total costs as a function of output. Profit is equal to total revenues minus total costs. The profit maximization point is where any changes in output or prices decreases the firms profits.
Answer and Explanation: 1
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View this answerIf the wage rate is $8 per day, multiply the wage rate by the amount of labor to determine the total cost. Multiply the price by the total output per...
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