A bakery operating in a competitive market sells its output for $20 per cake and hires labor at $10 per hour. To maximize profit, it should hire labor until the marginal product of labor is how many cakes per hour?

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09-12-2022
Business

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A bakery operating in a competitive market sells its output for $20 per cake and hires labor at $10 per hour. To maximize profit, it should hire labor until the marginal product of labor is how many cakes per hour?

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PallaviB PallaviB · Answer 1 · 2022-12-16T07:48:57-05:00

To maximize profit, The bakery should hire labor until the marginal product of labor is equal to 20 cakes per hour.

This means that the bakery should hire labor until the additional cakes per hour (the marginal product of labor) is equal to $20. This implies that the bakery should hire labor until they are producing 20 cakes per hour.

The marginal product of labor is the amount of output that an additional unit of labor can produce.The marginal cost of labor (or the cost of hiring an additional hour of labor) is $10.

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