Suppose a competitive firm can sell its output for $7 per unit. The following ta

Question

Suppose a competitive firm can sell its output for $7 per unit. The following table gives the firm’s short run production function.
Labor Output
0 0
1 15
2 40
3 70
4 86
5 94
6 98
In the table below, you will determine several points on the firm’s demand curve for labor. To do this, you must determine how many workers the firm should hire for different values of the wage rate in order to maximize profit. Complete the table below:
Wage Rate Per Worker Quantity Demanded of Workers
$30
$75
$110
$120

Explanation / Answer

First, you find the marginal output and profit for the firm

Labour Output Marginal Output Marginal Revenue 0 0 1 15 15 105 2 40 25 175 3 70 30 210 4 86 16 112 5 94 8 56 6 98 4 28

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