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Managerial Economics and Profit Maximization

13. Suppose that the firm's Production Data is given in the following schedule (where Q is the level of output).
Workers Output
Q (units)
0 0
1 600
2 1000
3 1290
4 1480
5 1600
6 1680

If P=$50 and w=$14,500, how many workers should the firm hire to maximize profits?

Workers Output (Q) MPL
0 0 ---
1 600 600
2 1000 400
3 1290 290
4 1480 190
5 1600 120
6 1680 80
What is 2 = $14500? w=$14,500.

9. Suppose that the firm's cost function is given in the following schedule (where Q is the level of output).
Output
Q (units) Total Cost
0 7
1 25
2 37
3 45
4 50
5 53
6 58
7 66
8 78
9 96
10 124

Determine the:
(a) Marginal cost schedule
See table below.

(b) Total cost schedule

Output (Q) Total Cost MC
0 7 ---
1 25 18
2 37 12
3 45 8
4 50 5
5 53 3
6 58 5
7 66 8
8 78 12
9 96 18
10 124 28

E = 1.58689459
What problem did this address?
Workers Output (Q) MPL
0 0 ---
1 600 600
2 1000 400
3 1290 290
4 1480 190
5 1600 120
6 1680 80

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13.
P is price per unit and w is cost of 1 unit of labor. To maximize profits, the firm should hire as many labor till we reach the point where MRP (Marginal Revenue Product) = w (Wages Rate)
Workers Output (Q) MPL MRL = ...

Solution Summary

This job shows how to attain profit maximization.

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