Zowie! Surfboards has the following production function: Number of Workers Number of Surfboards 1 2 3 4 5 Produced 12 21 29 36 42 If surfboards sold for $30 and the nominal wage rate was $200, how many workers would the firm employ? a. 5b. 3c. 4d. 2

The correct answer is:

4 (c.)

Explanation:

IN order to decide how many workers will be employed, we will compare the total amount of sales from the total production quantities with the wages, and find the differences between the total sales and wages, the one with the largest amount left over after deduction of wages gives the most profit hence will be the number of workers that will be employed. The calculation is done below as follows:

No. of workers Qty. of product sales ($30/product) Wages ($200/worker)

1 12 360 200

2 21 630 400

3 29 870 600

4 36 1,080 800

5 42 1,260 1000

Next, we will find the differences between the sales and wages when each set of workers were employed:

No. of Worker (s) sales wage ($) difference (net sales) ($)

1 360 200 160

2 630 400 230

3 870 600 270

4 1,080 800 280

5 1,260 1000 260.

From the table above, the greatest net sales was made when 4 workers were employed, hence the firm will employ 4 workers to make the highest turnover.