Consider a firm in a perfectly competitive market with the production function s

Question

Consider a firm in a perfectly competitive market with the production function shown in the following table. Assume that all variable costs come from the number of workers employed each day; therefore, you are not considering variations in capital stock. According to the table values, the firm pays a daily wage rate of per worker and sells its output at a price of per unit. Using this information, enter the missing values in the table above that is, variable cost when three workers are hired, total revenue when 15 units are produced, the marginal revenue product of the fourth worker hired, and the marginal cost of the 43rd unit of output.

Explanation / Answer

According to the table values, the firm pays a daily wage rate of $60 per worker and sells its output at a price of $5 per unit.

Variable cost when 3 workers are hired is $180. (i.e. 60 x 3)

Total Revenue when 15 units are produced is $75 (i,e. 15 x5)

Marginal revenue product of the 4th worker hired is $30 (i.e. 215 - 185)

Marginal cost of 43rd units of output is $10 [i.e. 60 / (43 - 37)]

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