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1 The A-1 Corporationsuppliesairplanemanufacturerswith preformedsheet metal panels that are used on the exterior of aircraft. Manufacturing these panelsrequiresonly five sheet metal formingmachines whichcost $500 each,
1 The A-1 Corporationsuppliesairplanemanufacturerswith preformedsheet metal panels that are used on the exterior of aircraft. Manufacturing these panelsrequiresonly five sheet metal formingmachines whichcost $500 each, and workers. These workers can be hired on an as-needed basis in the labormarketat $9,000 each Giventhe simplicityof the manufacturing process, the preformed sheet metal panel market is highly competitive. Therefore, the market price for one of A-1's panels is $80. Based on the productiondata in the accompanyingtable how manyworkersshouldA-1 hire to maximize its profits? MachinWorker es S Output 5 0 0 600 NP 1,00 0 5 3 1,29 0 5 4 1,48 0 5 5 1,60 0 5 6 1,68 0 Number of workers: 5 5 Correct Explanation To maximize profits the firm should continue adding workers so long as the value marginal product of labor exceeds the wage. The value marginal product of labor is defined as the marginalproductof labortimes the price of output Here, outputsells for $80 per panel, so the value marginal product of the third worker is $80(290) = $23,200
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