Question

Due to a rise in popularity, Penny's firm begins to make hair bows rather than flower barrettes. She can make hair bows at a rate of 5 each hour. The firm can sell these bows for $4.99 each. What is Penny's value of the marginal product of labor for each hour she works? Give your answer to two decimals. $ ____
What is the highest wage the firm would be willing to pay Penny? Give your answer to two decimals. $ ____

Answer 1

The number of bows that Penny makes per hour and the price the firm sells at shows that the value of the marginal product is $24.95 per hour.

The highest wage the firm will pay is $24.95 per hour.

What is the value of Penny's marginal product?

This can be found by the formula:

= Price x Marginal product of Penny

= 4.99 x 5

= $24.95 per hour

The highest wage the firm can pay would be the wage amount that equals their marginal revenue as this is the only way they can maximize profit.

Their marginal revenue in this case is the $24.95 per hour that they pay to Penny so this will be their highest wage to her as well.

Find out more on profit maximization at brainly.com/question/13749309.

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