Question

Omega Custom Cabinets produces and sells custom bathroom vanities. The firm has determined that if it hires 10 workers, it can produce 20 vanities per week. If it hires 11 workers, it can produce 22 vanities per week. It sells each vanity for $800, and it pays each of its workers $1,000 per week. Which of the following is correct?A. For the 11th worker, the marginal profit is $600. B. For the 11th worker, the marginal revenue product is $2,000. C. The firm is maximizing its profit. D. If the firm is employing 11 workers, then its profit would increase if it cut back to 10 workers.

Answer 1

Answer:the correct answer is A. For the 11th worker, the marginal profit is $600.

Explanation:

10 men             20  vanities per week

11   men            22 vanities per week

1 man more       2 vanities more

If the company uses 1 man more produces 2 vanities more, so the company spends $1000 on the extra man and makes 2*$800= $1,600 (for two extra vanities). For the 11th worker, the marginal profit is = $1600-$1000= $600