A firm has the following relationship between the number of employees it has (E)
ID: 1257627 • Letter: A
Question
A firm has the following relationship between the number of employees it has (E) and its daily output:
Employees (E)
output
APE
MPL
VMPE
0
0
1
50
2
60
3
68
4
74
5
78
6
80
In the table above, calculate and enter the average products of labor (APE).
In the table above, calculate and enter the marginal products of labor (MPE).
Assume that the firms output is sold at a price of $20 a unit. Calculate and enter the value of marginal product of labor (VMPE).
Say that the wage rate is $ 100/day. How many workers will this firm hire, as a profit maximizer?
If the wage rate rises to $150/day, how many workers will this firm hire?
Employees (E)
output
APE
MPL
VMPE
0
0
1
50
2
60
3
68
4
74
5
78
6
80
Explanation / Answer
APE = Output / E
MPL = Difference in output
VMPE = MPL × Price ($20)
The required table is as below:
E
Output
APE
MPL
VMPE
0
0
0
0
0
1
50
50
50
$1,000
2
60
30
10
$200
3
68
22.67
8
$160
4
74
18.5
6
$120
5
78
15.6
4
$80
6
80
13.33
2
$40
Wage rate is $100 / day:
Number of workers = Wage rate / Price = $100 / $20 = 5
Wage rate is $150 / day:
Number of workers = Wage rate / Price = $150 / $20 = 7.5
E
Output
APE
MPL
VMPE
0
0
0
0
0
1
50
50
50
$1,000
2
60
30
10
$200
3
68
22.67
8
$160
4
74
18.5
6
$120
5
78
15.6
4
$80
6
80
13.33
2
$40
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