The table above shows the total product schedule for Shines Car Wash. The market for car washes is perfectly competitive and car washes sell for $5 each. The labor market is competitive and the wage rate is $50 per day
What is the value of marginal product for each worker? How many workers does the firm hire to maximize profit?
Quantity of labor
(workers) Cars washed
(cars per day) Value of marginal product
(dollars per day)
1 8
2 23 75
3 33 50
4 40 35
5 45 25
The value of marginal product is the marginal product multiplied by the price of a car wash. The value of marginal product schedule is given in the table above. To maximize its profit, when the wage rate is $50 per day, Shines Car Wash hires 2 workers because at this point the value of marginal product equals the wage rate.
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