Here is a schedule showing the amount of output of corn firm X can produce using
ID: 1198959 • Letter: H
Question
Here is a schedule showing the amount of output of corn firm X can produce using one fixed acre of land and different numbers of workers. This firm can sell all the corn they want at a price of $10 per bushel. The land costs them $100. Use
# of workers Marginal product of each worker
1 50
2 100
3 60
4 20
5 10
6 4
7 2
11) How much is the total product with 4 workers
12) if the wage is $40, how many workers should this firm hire to maximize profits?
13) If this firm hires the number of workers you answered for question 12, how much profits will they make
14) how much is TOTAL FIXED cost for this firm in the SHORT RUN ?
15a) how much is it in the long run
15b) why does worker 2 have a larger marginal product than worker 1 even though they have the same level of skill?
Explanation / Answer
11) How much is the total product with 4 workers
230 units (20+60+100+50)
12) if the wage is $40, how many workers should this firm hire to maximize profits?
3 workers. for equilibrium wage rate = MP of labour but at no point it is equal to 40 so highest possibility is 3 units if 4 are hired it will lead to loss of $ 20
13) If this firm hires the number of workers you answered for question 12, how much profits will they make
They will make a profit of
TR -TC
TR = 210*10 = 2100
TC = 100 +120 = 220 (40*3)
Profits = 2100-220 = 1880
Profit = 14) how much is TOTAL FIXED cost for this firm in the SHORT RUN ?
$ 100 rent of land
15a) how much is it in the long run
Thee is no fixed cost in the long run
15b) why does worker 2 have a larger marginal product than worker 1 even though they have the same level of skill?
It is due to law of variable proprtions which states that as more and more of factor units are produced keeping fixed factors constant, MP of variable factor first increases, then decreases and finally becomes negative. t is so because in inital stage, fixed factor emain underutilized and with more factor inputs benefit of division of labour can be availed.
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