2.The relationship between output and the quantity of labor employed for one fir
ID: 1201411 • Letter: 2
Question
2.The relationship between output and the quantity of labor employed for one firm is shown below (given an amount of the fixed inputs and a production technology). No. of Workers 27 28 29 30 31 Hourl 270 279 287 293 298 2i. The marginal product of the 30h worker is d. e. 293 It cannot be determined. 2.ii is Suppose the price of the product is $5. The marginal revenue product of the 30th worker b. S6 C. S30 d. 1,465 e.It cannot be determined. 2iii. Suppose this firm operates in perfectly competitive markets, and the market wage rate is S32 per worker per hour. How many workers does the following perfectly competitive firm want to hire to maximize profits? 28 d. 30 e.Explanation / Answer
The table summerizes the data given in the question:
NO OF WORKERS
OUTPUT
MP
MRP
27
270
28
279
9
45
29
287
8
40
30
293
6
30
31
298
5
25
2 i) From the table, note that the marginal product of 30th labor is 6 units. Marginal product of labor is the addition to the total output made by that additional labor.
So the correct answer is C.
2 ii)
From the table, note that the marginal revenue product of 30th labor is $30. Marginal revenue product of labor is the market value of the addition to the total output made by that additional labor.
So the correct answer is C.
2 iii) A competitive firm hires labor upto the point where VMPL or MRP is > or = Wage rate. This occurs when it hires 29th labor since its MRP is 40 and wage rate is $32.
Hence the correct option is C.
NO OF WORKERS
OUTPUT
MP
MRP
27
270
28
279
9
45
29
287
8
40
30
293
6
30
31
298
5
25
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