Question

Number of Workers Total Number of Sarees Produced per day
1 5
2 11
3 18
4 26
5 35
6 45
7 56
8 68

Suppose the wage per day is $70 and the sarees are sold for $50 each then how many workers will the firm hire?

A) Four
B) Five
C) Six
D) Seven
E) None of the above

Answer 1

As marginal product of labor (which is calculated as the change in output divided by the change in labor used) increases with increase in quantity of labor used from 1 to 8, then the optimal quantity of labor is 8. So, the correct answer is E.