The C-Gourmet Burger company sells burgers for $4.05 each. The owner of the this company pays...

The C-Gourmet Burger company sells burgers for $4.05 each. The owner of the this company pays workers $192 per day. The following table (Table 22) shows employment and production of burgers per day at this company.

Table 22

Labor (number of workers)	Quantity (Units of burgers per day)
0	0
1	74
2	136
3	189
4	236
5	270
6	300

Refer to Table 22. To maximize its profit, how many workers would the C-Gourmet Burger company employ? Show you work

Expert Solution

Ans: To maximize its profit, C- Gourmet Burger company would employ 3 workers.

Explanation:

According to the marginal productivity theory , the firm will hire the number of labor where marginal revenue product of labor equals wage rate ( MRPL = W ) or marginal revenue product of labor is greater than the wage rate ( MRPL > W ).

Marginal physical product of labor = Change in Quantity / Change in number of labor

or

MPP = ∆ Q / ∆ L

Marginal revenue product of labor = Marginal physical product of labor * Price

or

MRPL = MPP * Price

Labor ( number of workers)	Quantity (units of burgers per day)	Marginal Physical Product of Labor	Marginal Revenue Product of Labor	Total Revenue	Total Cost	Profit/Loss
0	0	--	--	0	0	--
1	74	74	299.7	299.7	192	107.7
2	136	62	251.1	550.8	384	166.8
3	189	53	214.65	765.45	576	189.45
4	236	47	190.35	955.8	768	187.8
5	270	34	137.7	1093.5	960	133.5
6	300	30	121.5	1215	1152	63

Rahul Sunny answered 3 years ago

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