John’s Jelly Bean Jungle currently employs 10 workers and manufactures 100,000 pounds of jelly beans each year. The workers each earn $30,000 per year. Which of the following statements is true?

Question

Assuming that there are no labor expenses, the total wages paid per year are $300,000.

The marginal product of the 10th worker is 9,000 pounds of jelly beans.

There are currently diminishing marginal returns.

An 11th worker should definitely not be hired to maximize profit.

Answer 1

To analyze the statements about John's Jelly Bean Jungle, let's break them down:

1. "Assuming that there are no labor expenses, the total wages paid per year are $300,000."
   This statement is false. The total wages paid is the product of the number of workers and their individual wages. With 10 workers earning $30,000 each, the total wages paid is:
   \(10 \text{ workers} \times $30,000/\text{worker} = $300,000\).
   However, the phrase "assuming that there are no labor expenses" is contradictory since the wage expense is indeed a labor expense.

2. "The marginal product of the 10th worker is 9,000 pounds of jelly beans."
   This statement would need more information to be verified. We don't have the data on how output changes when the 10th worker is added, so we can't determine if the marginal product is actually 9,000 pounds or not.

3. "There are currently diminishing marginal returns."
   Diminishing marginal returns occur when adding an additional unit of labor results in a smaller increase in output than previous units of labor. Without specific data on production changes with each worker added, this cannot be confirmed as true or false based solely on the information given about 100,000 pounds produced with 10 workers.

4. "An 11th worker should definitely not be hired to maximize profit."
   This statement is not necessarily true. To determine whether hiring an 11th worker is beneficial or not depends on the marginal product of that worker relative to their cost. If the marginal product of the 11th worker is greater than the cost of their wage ($30,000), it may be profitable to hire them. Without knowing the marginal product specifically, we can't affirm this statement.

Based on the given options and assuming typical economic principles, the most justifiable statement would likely be that there are currently diminishing marginal returns, as increasing labor generally leads to diminishing returns in production. But we cannot confirm this without more data on productivity changes as more workers are hired.

Overall, none of the statements can be definitively affirmed as true without additional information.