Here is information on production for a firm. Use this to answer (8)-(12): The l

Question

Here is information on production for a firm. Use this to answer (8)-(12): The list on the right shows how much corn each man adds to the output of. com a farm can produce using various different amounts of labor and one acre of land. This firm can sell the com for $ 30 per bushel. They pay $ 10 for the one acre of land. The wage is $ 60 per worker. If this firm hires 3 workers, it will have a TOTAL PRODUCT If this firm hires 3 workers, it will have TOTAL REVENUE = $ How many workers should they hire to maximize profits ? If this firm docs hire the number of workers you answered for question (8), exactly how much profits will they make ? If all the workers have the same level of skill, why does the 2nd worker have a LARGER marginal product than the 1st worker ?

Explanation / Answer

8. 80 bushels

9.2400

10. either 4 or 5

11.2300

12. Due to  "law" of diminishing marginal returns, the marginal product initially increases when more of an input (saylabor) is employed, keeping the other input (say capital) constant.This so beacause here in our example we have one acre of land and initially we had one worker producing 20 units of output ,if we one more labor we will be producing 50 units of output because this additional unit of labor when empolyed will fully exploit the potential of the land and if more of labor is empolyed the potential of land will be underexplioted.In a single acre of land just imagine number of workers working there.What would happen ,subsequently productivity will go down and potentiality of land remain unexpolited to the full extent.

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