calculation process for optimal output
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Allied company machines produces an output that it sells in a highly competitive market at a price of $100 per unit. Its inputs include two machines (which cost the firm $50 each) and workers, who can be hired on an as-needed basis in a labor market at a cost of $2,800 per worker. Based on the following production data, how many workers should the firm employ to maximize its profits.
Machines Workers Output
2 0 0
2 1 60
2 2 100
2 3 129
2 4 148
2 5 160
2 6 168
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Solution Summary
Steps to reach optimal output are delivered. The calculation process for optimal output is examined.
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P = 100
Since the machine input is fixed at 2, we do not need to worry about the fixed cost
The marginal cost of labour is MCL = 2800
The firm will maximize its total profit by ...
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