Question

Rosie's Flower Shop sells bouquets of roses for $15 each. If Rosie hires 10 workers, she can sell 500 bouquets per week. If she hires 11 workers, she can sell 560 bouquets per week. Rosie pays each of her workers $400 per week. Which of the following is correct?A. For the 11th worker, the marginal profit is $500. B. For the 11th worker, the marginal revenue product is $500. 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 to this question is A) with the addition of 11th worker , the marginal profit ( for 11th worker ) of Rosie's flower shop would be $500.

Explanation:

Marginal profit can be defined as the additional amount of profit that a company earns because of an additional unit that had been produced.

Here we can calculate what marginal profit would be for the 11th worker as-

Workers   Selling price             Cost price                 Profit

10             $7500 (500 x $15)    $4000 (10 x $400)   $3500

11              $8400 (560 x $15)    $4400 (11 x $400)   $4000

So from the given above information we can say that if we take out the marginal profit for 11th worker it would be $500 ( $4000 - $3500 ).