Answer to Question #307420 in Microeconomics for Flavu

Question

The following data are for a pop-up sandwich shop operating in perfectly competitive goods and labour markets. All figures are hourly and the market price for a sandwich is £1.99.​

 

Number of workers

Wage Rate (£)

Total Physical Product of Labour (output in sandwiches)

1

9.99

5

2

9.99

15

3

9.99

23

4

9.99

29

5

9.99

33

6

9.99

35

Answer 1

a)

What is the profit-maximizing number of workers?

The correct answer is;

B ​-3 workers per hour

b)

If the business also has fixed costs of £1.50 per hour, what is the level of profit when the business employs the profit-maximizing number of workers?

The correct answer is;

D- ​£3.90 per hour

c)

If the market price of a kebab increases from £2.10 to £2.20 per kebab, what will be the new profit-maximizing number of workers?

The correct answer is;

C- ​4 workers per hour