Consider a competitive, price taking firm that employs only one variable input,

Question

Consider a competitive, price taking firm that employs only one variable input, labor, to produce a product that sells for $14 per unit. The wage rate is $24 per unit of labor and total fixed costs are $500. Fill in the blanks in each column of this table:

All the numbers already filled out I understand how to get them and they are correct, I am lost on how to find the last two columns. I have the answer sheet but not sure how to mathmatically solve it. It goes 3,2,1.71,2.18,3,4.8,8,12,24 down MC column and the profit goes after the -500, -412,-268,-96,34,122 and so on but I'd really appreciate knowing how to solve so I can do it on my own on the test. Thank you!

Units of Labor Output Marginal Product Marginal Revenue Product Average Product Average Revenue Product Marginal Cost Profit 0 0 xx xx xx xx xx -500 1 8 8 112 8 112 2 20 12 168 10 140 3 34 14 196 11.33 158.6 4 45 11 154 11.25 157.5 5 53 8 112 10.6 148.4 6 58 5 70 9.67 135.38 7 61 3 42 8.71 121.94 8 63 2 28 7.87 110.18 9 64 1 14 7.11 99.55 10 62 -2 -28 6.2 86.8 xx

Explanation / Answer

MC= change in cost due to additional labor employed/ marginal product= wage rate/ marginal product

when we move to L=1

MC= 24/8= 3

whenL=2

MC= 24/12=2

and so on

profit= output*price- Fixed cost- Labor/ variable cost

whenL=1

profit= 8*14 - 500-24*(1)=-412

L=2

profit= 20*14- 500- 24*(2) =-268

and so on

Units of Labor Output Marginal Product Marginal Revenue Product Average Product Average Revenue Product Marginal Cost Profit 0 0 xx xx xx xx xx -500 1 8 8 112 8 112 3.00 -412 2 20 12 168 10 140 2.00 -268 3 34 14 196 11.33 158.6 1.71 -96 4 45 11 154 11.25 157.5 2.18 34 5 53 8 112 10.6 148.4 3.00 122 6 58 5 70 9.67 135.38 4.80 168 7 61 3 42 8.71 121.94 8.00 186 8 63 2 28 7.87 110.18 12.00 190 9 64 1 14 7.11 99.55 24.00 180 10 62 -2 -28 6.2 86.8 -12.00 128

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.