Directions: In answering the questions, you should emphasize the line of reasoning that generated your results; it is not enough to list the results of your analysis. Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes.

Question 1

Sparkle Car Wash is a profit-maximizing firm with the following production information.

1. With which worker is marginal product maximized?
2. Identify and define the economic principle that explains why marginal product eventually decreases.
3. Explain why Sparkle would never hire the sixth worker.

If Sparkle charges $6 for washing a car, what is the maximum daily wage that Sparkle would be willing to pay the fourth worker?