A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired; 32 when two workers are hired; 37 when three are hired; and 40 when four are hired. The farmer's product sells for $3 per unit and the wage rate is $13 per worker. How many workers should the farmer hire?

A) 20.B) 32.C) 37.D) 40.

This question is wrong, according to given options in the question it should be, What is the farmer's profit-maximizing output?, instead of How many workers should the farmer hire?

Marginal Product of Labour (MPL): MPL is the increase in total production when one unit of labour is added.

Marginal Revenue Product of Labour (MRPL): MRPL is the increase in revenue when one unit of labour is added.

Marginal Cost of Labour (MCL): MCL is extra cost of employing an additional unit of labour

Total Product MPL MRPL MCL

1st Labour = 24

2 Labour = 32 (32-24) = 8 8 X $3 = $24 $13 ($13 X 1)

3 Labour = 37 (37-32) = 5 5 x $3 = $15 $13 ($13 X 1)

4 Labour = 40 (40-37) = 3 3 X $3 = $9 $13 ($13 X 1)

When MRPL is greater than MCL the firm is generating profit from hiring additional labour/worker.

If MRPL and MCL become 0 than the firm is neither making profit nor loss from hiring additional labour/worker.

If MCL is greater than MRPL the firm is making loss from hiring additional labour/worker.

In the above table, with 3 workers farmer's MRPL is greater than MCL but when it hires 4th worker MCL becomes greater than MRPL so firm will not hire 4th worker.

So farmer's profit-maximizing output will be 37, which is the output of 3 workers.