The success of a cartel rests upon discouraging some firms in the market from jo

Question

The success of a cartel rests upon discouraging some firms in the market from joining inducing all members lo differentiate their products and charge different prices making exit from the cartel as nearly costless as possible inducing all members to limit their combined output and charge the same price When 5 units of labor are employed, total product is 9 units, when 6 units of labor are employed total product is 11 units of output If the price of output is $5 per unit, what is the marginal revenue product of the 6th unit of labor? $10 $15 $55 $5 When MFC

Explanation / Answer

1. D) inducing all members to limit their combined output and charge the same price.

2. MRP of 6th unit = TR of 6th unit - TR of 5th unit

TR = PX Q

TR of 6th unit = 5 X 11 = $ 55

TR of 5th unit = 5 X 9 = $ 45

MRP of 6th unit = 55 - 45 = $ 10

Answer is A) $ 10

3. A) hire more workers because firm's additional fixed cost is less than firm's marginal revenue. So, it is profitable for firm to increase its production.

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