Profit Maximization Example

In our numerical example, suppose that the price of output is $100 per unit and the wage is $500 per worker per period. Then the p*MP, wage, and profits will be something like this:

Table 4

Labor Marginal
Productivity p*MP Wage Accounting
Profit

0 500 0

9.45 945

100 500 44500

8.35 835

200 500 78000

7.25 725

300 500 100500

6.15 615

400 500 112000

5.05 505

500 500 112500

3.95 395

600 500 102000

2.85 285

700 500 80500

1.75 175

800 500 48000

0.65 65

900 500 4500

-0.45 -55

1000 500 -50000

Labor	Marginal Productivity	p*MP	Wage	Accounting Profit
0	Marginal Productivity	p*MP	500	0
0	9.45	945	500	0
100	9.45	945	500	44500
100	8.35	835	500	44500
200	8.35	835	500	78000
200	7.25	725	500	78000
300	7.25	725	500	100500
300	6.15	615	500	100500
400	6.15	615	500	112000
400	5.05	505	500	112000
500	5.05	505	500	112500
500	3.95	395	500	112500
600	3.95	395	500	102000
600	2.85	285	500	102000
700	2.85	285	500	80500
700	1.75	175	500	80500
800	1.75	175	500	48000
800	0.65	65	500	48000
900	0.65	65	500	4500
900	-0.45	-55	500	4500
1000	-0.45	-55	500	-50000