Track 8, a local microbrewery, hires an economist to analyze its short run produ
ID: 2496205 • Letter: T
Question
Track 8, a local microbrewery, hires an economist to analyze its short run production. However, the economist samples too much of the company’s product, and is fired in the process. Unfortunately, much of the production data is missing, as evidenced in the table below. Believing that college students never consume alcoholic beverages, the company decides to hire you to complete the missing portions of the table.
Complete the missing portions of the production table below.
Quantity of Labor
Quantity of Capital
Marginal Product of Labor
Average Product of Labor
Total Product of Labor
0
5
---
---
1
5
50
2
5
45
3
5
120
4
5
33
5
5
- 8
B. Even an inebriated economist knows, from the standpoint of profit maximization, the brewery should never hire 5 workers. Carefully explain why utilizing the concept of efficiency.
Quantity of Labor
Quantity of Capital
Marginal Product of Labor
Average Product of Labor
Total Product of Labor
0
5
---
---
1
5
50
2
5
45
3
5
120
4
5
33
5
5
- 8
Explanation / Answer
formulas - APL= TPL/Q
TPL=APLxQ
MPL= TPn-TPn-1
TPL at 0 level of labor will be 0.
MPL=TPn-TPn-1 , at n= 1 or at 1 unit of labor
MPL1=TP1-TP0 , where MPL1= 50 ,TP1= ? ,TP0=0
50=TP1-0
TP1= 50(total product at 1 unit of labor is equal to 50,Average product APL= 50/1= 50
Now we take at 3 units of labor TPL is equal to 120.
at 3 units of labor APL= 120/3=60
At 2 units of labor Apl is 45 , This implies TPL= 90(45X2)
sImilarly at 4 units of labor APL is 33.therfore TPL=33X4=132
At 5 units of labor MPL=-8, where MPL5 =TPL5 - TPL4 , Where MPL5 =-8,TPL5=? TPL4=132
-8 =TPL5 - 132
TPL5 = -8+ 132
TPL5 = 124 ( total product at 5 units of labor)
APL at 5 units of labor = TPL at 5 /Q
124/5=24.8
Now MPl we can get by the formual MPL= TPLn-TPn-1
MPL at 2 units of labor = 90-50= 40
MPl at 3 units of labor 120-90=30
MPL at 4 units of labor=132-120=12
MPL at 5 units of labor=124-132=-8
B.brewery will never hire 5 workers becaise marginal product of labor is negative at that point.Firm will always hire labor where marginal product of labor MPL is equal to its real wage.
quantity MPL APL TPL 0 - - 0 1 50 50 50 2 40 45 90 3 30 60 120 4 12 33 132 5 -8 24.8 124Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.