Consider the Case of Eastover Coal Mining Company, Operating Its

question 45

Multiple Choice

Consider the case of Eastover Coal Mining Company, operating its mine in the small, isolated town of Eastover, Kentucky. The data in the table describe the firm, where MP_L = marginal product of labor and MRC_L = marginal resource cost of labor. If the firm sells its coal in a purely competitive market for $10 per ton, how many laborers should it hire? $\begin{array} { | c | c | c| } \hline\text { Nuriber of } & \text { MPL (Tons of } & \text { MRGL } \\\text { Labores } & \text { Coal) } & \\\hline 1 & 10 & \$ 20 \\\hline 2 & 7 & 30 \\\hline 3 & 5 & 55 \\\hline 4 & 4 & 90 \\\hline 5 & 3.5 & 120\\\hline\end{array}$

• A) 2
• B) 3
• C) 4
• D) 5

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Definitions:

Gross Profit Method

This is an accounting technique used to estimate inventory value, calculating gross margin as a percentage of sales to find the cost of goods sold and ending inventory.

Markup on Cost

The percentage added to the cost of goods to cover overhead and profit, calculated by dividing the gross profit by the cost.