Marginal Product of Labor to Maximize Profits of a Company.

Question

Consider the Labor Economics Question. This will provide insight into the idea of the optimal number of workers and the value of the marginal product of labor.

If wages in the restaurant is $9.00 per hour and the price of a Hamburger is $4.00 and the production function for the workers is:

            Q = 5L – 0.25L2

a) How many workers should Your Restaurant employ during the lunch hour to maximize profits?

(note—the value of the marginal product of labor and the marginal revenue product are the same) We maximize profits which are total revenues less total costs:

b.) Compute the maximum profit at Your Restaurant.

(note—consider that profit involves Total Revenue and Total Costs)

c.) Compute the profit created if you hire an additional 0.5 worker. Explain why it is or is not profit maximizing to hire an additional 0.5 worker.

d) Suppose instead that you wants to keep the lines as short as possible by maximizing production. How many workers should you employ during the lunch hour?

 

Summary

The question belongs to micro economics and discusses about micro economic factors for a restaurant that can effect total revenue, total expenses, profit and production.

 

Total Word Count 170

 

 

 

 

 

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