Complete the following labor demand table for a firm that is hiring labor compet

Question

Complete the following labor demand table for a firm that is hiring labor competitively and selling its product in a competitive market 9. a. How many workers will the firm hire if the market wage rate is $27.95? $19.95? Explain why the firm will not hire a larger or smaller number of units of labor at each of these wage rates. b. Show in schedule form and graphically the labor demand curve of this firm Marglnal Units of Total Marginal Product Total Revenue Labor Product Product Price Revenue Product $2 $ 0 172 312 432 532 60 0 2 2 6

Explanation / Answer

Ans:

Marginal product is the additional output from employing an additional unit of labor

Marginal cost is the additional cost for producing an additional unit of output.

Marginal Revenue Product = Marginal product * Selling Price

Labor demand schedule

The profit maximizing level of output is where marginal revenue is equal to marginal cost.marginal cost is the wages paid for employing additional worker.

1) Wage rate is $27.95

The number of workers employed is 2.

2) Wage rate is $19.95

The number of workers employed is 4.

At the above number of workers the firm can maximize the profit.

Units of labor Total Product Marginal Product Product Price Total Revenue Marginal Revenue Product 0 0 0 $2 0 0 1 17 17 $2 $34 $34 2 31 14 $2 $62 $28 3 43 12 $2 $86 $24 4 53 10 $2 $106 $20 5 60 7 $2 $120 $14 6 65 5 $2 $130 $10

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