Putnam, Inc. finds that as it increases the number of workers it hires, the numb
ID: 1114654 • Letter: P
Question
Putnam, Inc. finds that as it increases the number of workers it hires, the number of baseballs produced daily changes as follows:
Workers
Baseballs
1
10
2
30
3
60
4
100
5
135
6
165
7
190
8
210
9
225
10
235
11
240
12
240
13
235
a) The price of baseball pucks can be $2, $3, or $4 each. For each number of workers, calculate the marginal physical product, the average physical product, and the three marginal revenue products corresponding to the three baseball prices.
b) Assume the price of baseballs is $2. If the wage rate of labor is $40 a day, how many workers will Putnam hire? Note that there are two employment levels at which the wage equals the MRP; why did you pick one of them?
c) When the wage rises to $60, what will the new employment level be?
d) How does employment change when the price of baseballs rises to $3 and then $4, if the wage rate stays at $60?
Workers
Baseballs
1
10
2
30
3
60
4
100
5
135
6
165
7
190
8
210
9
225
10
235
11
240
12
240
13
235
Explanation / Answer
a) Workers(L) Baseballs(TP) MPL APL MRP(P=$2) MRP(P=$3) MRP(P=$4) 1 10 10 10 20 30 40 2 30 20 15 40 60 80 3 60 30 20 60 90 120 4 100 40 25 80 120 160 5 135 35 27 70 105 140 6 165 30 27.5 60 90 120 7 190 25 27.14286 50 75 100 8 210 20 26.25 40 60 80 9 225 15 25 30 45 60 10 235 10 23.5 20 30 40 11 240 5 21.81818 10 15 20 12 240 0 20 0 0 0 13 235 -5 18.07692 -10 -15 -20 APL= TP/L MPLi = Tpi-Tpi-1 MRPL = P*MPL b) AT w = $40, the firm will engage worker until MRP >=40. This happens at L = 8. c) At w= $60 and P = $2, L = 6 d) at w = $60 and P = $3, L = 2 and at P = $4 L = 1.
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