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.

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