The following table shows the production function for a bicycle manufacturer Lab

Question

The following table shows the production function for a bicycle manufacturer Labor (# of workers) Number of Bicycles Marginal Product Marginal Revenue 3 $2 2 4 4 5 10 12 13 2 a) Suppose that the weekly wage is $700, the marginal labor cost of the second worker per week is $ b) Suppose that the price of a bicycle is $460. Instruction: Fill in the values for the marginal revenue in the tabl above c) If the price per bicycle is $460 and the weekly wage is $700 in order to maximize profit the bicycle manufact will employworkers. d) If the price per bicycle drops to $300, in order to maximize profit the number of employed workers will (Click to select

Explanation / Answer

a) since, there is only one extra laor in second week, so marginal cost will be $700

b)

c) From the table it is evident that max. profit is when we employ 4 workers.

d)

From the table, no. of workers employed at price of 300 should be 3.

Labor No. of Bicycles Marginal Product Marginal Revenue Total Revenue Cost Profit 1 3 3 1380 1380 700 680 2 7 4 1840 3220 1400 1820 3 10 3 1380 4600 2100 2500 4 12 2 920 5520 2800 2720 5 13 1 460 5980 3500 2480

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