Question

Labor demand Homework. Unanswered Consider the following data taken from a Florida orange grove (farm) where the price of oranges is $4.00 per bushel and the price per worker is $3000 (per month). What would be a correct guess how how many workers would be hired by the farm? Workers Output (bushels 400 1600 2600 3400 4000 4400 4600 Numeric Answer: 4 You are incorrect Answered - Incorrect 2 attempts left. Change your responses to resubmit

Answer 1

Workers	Output (Bushels)	Marginal Product of labor (MPL)	Value of marginal product of labor (VMPL)
0	0	----	------
1	400	400	1600
2	1600	1200	4800
3	2600	1000	4000
4	3400	800	3200
5	4000	600	2400
6	4400	400	1600
7	4600	200	800

MPL = change in Output / change in workers

VMPL = MPL * Price of output.

A firm will hire the workers till VMPL is higher than the wage rate or VMPL = Wage rate.

We can see that till 4 units of worker, VMPL is higher than wage rate of $3000.

It means firm should hire 4 workers.

Alternative method

Workers	Output (Bushels)	TR	TC	Profit
0	0	0	0	0
1	400	1600	3000	-1400
2	1600	6400	6000	400
3	2600	10400	9000	1400
4	3400	13600	12000	1600
5	4000	16000	15000	1000
6	4400	17600	18000	-400
7	4600	18400	21000	-2600

TR = Price * output

TC = wage * number of workers.

Profit = TR - TC

we can see that at 4 units of worker the profit is maximum.

hence farm should hire 4 workers.

Answer: 4 workers