Question

Sunshine's Organic Market sells organic produce. Assume that labor is the only input that varies for the firm. The store manager has determined that if she hires 9 workers, the store can sell 200 pounds of produce per day. If she hires 10 workers, the store can sell 230 pounds of produce per day. The store earns $4 for each pound of produce that it sells, and the manager pays each worker $60 per day. Which of the following is correct?Select one: a. All of the above are correct.b. The marginal profit from the 10th worker is $120.c. For the 10th worker, the marginal product is 20 pounds of produce per day.d. For the 10th worker, the marginal revenue product is $120 per day.

Answer 1

Answer: Option (d) is correct.

Explanation:

Correct option: For the 10th worker, the marginal revenue product is $120 per day.

If she hires 9 workers then the store can sell 200 pounds of produce per day

If she hires 10 workers then the store can sell 230 pounds of produce per day

Extra units produce from hiring 10th worker = 230 - 200 = 30 pounds of produce per day

Store earns = $4 for each pound

Therefore, the marginal revenue product for the 10th worker = selling price of each pound × Extra units produce from hiring 10th worker

= $4 × 30

=$120