Answer each of the following questions using economic theory covered in this les

Question

Answer each of the following questions using economic theory covered in this lesson.


1. Marginal revenue product is defined as the change in total revenue that results from the employment of an additional unit of a resource. A widget producer wishes to determine how the addition of pounds of rubber will affect its MRP and profits. See the table below, and answer each of the questions. (40pts/10pts each)


-
Pounds of rubber Number of widgets Price
(quantity of resource) (total product) of widgets ($)
________________________________________________________________

0 0 -
1 20 12
2 35 10
3 45 8
4 50 6
5 53 4


a. The marginal product of the 3rd pound of rubber is _______________.


b. The marginal revenue product of the 3rd pound of rubber is ________.


c. The price of rubber is $110 per pound. To maximize profit, the widget producer should produce__________________.

d. The price of rubber is $110 per pound. To maximize profit, the widget producer should buy and use: _______________

Explanation / Answer

We wil use this information below to answer the questions MC MR 0 0 - 0 0 1 20 12 240 240 2 35 10 350 110 3 45 8 360 10 4 50 6 300 -60 5 53 4 212 -88 a. The marginal product of the 3rd pound of rubber is __45-35=10_____________. b. The marginal revenue product of the 3rd pound of rubber is (45*8)-(35*10)=10____. c. The price of rubber is $110 per pound. To maximize profit, the widget producer should produce_____35_____________. d. The price of rubber is $110 per pound. To maximize profit, the widget producer should buy and use: __2 pounds produce 35_____________ Hope this helps

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