Suppose you are the President of Fraggle Rock Co., a producer of musical compact
ID: 1091690 • Letter: S
Question
Suppose you are the President of Fraggle Rock Co., a producer of musical compact discs (CDs). Assume Fraggle Rock Co. operates in a perfectly competitive product and perfectly competitive resource market. The market price (P) for each CD is given at $10 and the market wage rate (w) for labor is given at $160 per worker.
# units of labor
Total Product
Marginal Product (MP)
Product Price (P)
Total Revenue (TR)
Marginal Revenue Product (MRP)
0
0
--
$10
$0
--
1
30
$10
2
58
$10
3
84
$10
4
108
$10
5
130
$10
6
150
$10
7
168
$10
8
184
$10
9
198
$10
10
210
$10
A. Fill in the columns in the table above for MP, TR, and MRP.
B. Based on the data above and using the MRP = MRC Rule, find the # of units of labor that this firm should hire (L*). How do you know?
# units of labor
Total Product
Marginal Product (MP)
Product Price (P)
Total Revenue (TR)
Marginal Revenue Product (MRP)
0
0
--
$10
$0
--
1
30
$10
2
58
$10
3
84
$10
4
108
$10
5
130
$10
6
150
$10
7
168
$10
8
184
$10
9
198
$10
10
210
$10
Explanation / Answer
b) MRP= MRC = 16 when labor =8
# of units of labor that this firm should hire (L*) = 8
# units of labor Total Product Marginal Product (MP) Product Price (P) Total Revenue (TR) Marginal Revenue Product (MRP) Total cost MRC 0 0 -- $10 $0 -- 0 1 30 30 $10 $300 $300 160 160 2 58 28 $10 $580 $280 320 160 3 84 26 $10 $840 $260 480 160 4 108 24 $10 $1,080 $240 640 160 5 130 22 $10 $1,300 $220 800 160 6 150 20 $10 $1,500 $200 960 160 7 168 18 $10 $1,680 $180 1120 160 8 184 16 $10 $1,840 $160 1280 160 9 198 14 $10 $1,980 $140 1440 160 10 210 12 $10 $2,100 $120 1600 160Related Questions
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