Assume that the firm only uses labor as a resource in production and is hiring workers in a purely competitive labor market. In other words, the firm can hire as many workers as it wishes without affecting the equilibrium wage rate.
Units of Labor (L)
Total Product (Q)
Product Price (P)
Total Revenue (TR)
Marginal Revenue Product (MRP)
0
0
$2.20
$0
---
1
15
$2.00
$30
$30
2
28
$1.80
3
39
$1.60
4
48
$1.40
5
55
$1.20
6
60
$1.10
a. Is the firm selling its product in a purely competitive market or an imperfectly competitive market?
b. Fill out both the TR and MRP columns with the correct values.
c. Suppose the wage rate is $11.00 per worker. How many workers should be employed, in order to maximize profits?
d. If the firm hires the optimum number of workers, what is its total profit?
Assume that the firm only uses labor as a resource in production and is hiring workers in a purely competitive labor market. In other words, the firm can hire as many workers as it wishes without affecting the equilibrium wage rate.
|
Units of Labor (L) |
Total Product (Q) |
Product Price (P) |
Total Revenue (TR) |
Marginal Revenue Product (MRP) |
|
0 |
0 |
$2.20 |
$0 |
--- |
|
1 |
15 |
$2.00 |
$30 |
$30 |
|
2 |
28 |
$1.80 |
||
|
3 |
39 |
$1.60 |
||
|
4 |
48 |
$1.40 |
||
|
5 |
55 |
$1.20 |
||
|
6 |
60 |
$1.10 |
a. Is the firm selling its product in a purely competitive market or an imperfectly competitive market?
b. Fill out both the TR and MRP columns with the correct values.
c. Suppose the wage rate is $11.00 per worker. How many workers should be employed, in order to maximize profits?
d. If the firm hires the optimum number of workers, what is its total profit?
Related textbook solutions
Related questions
Fabric, Inc., owns a shoe factory and hires workers in a competitive labor market. The fabric required to make each pair of shoes costs $5. The company's weekly output of finished jeans varies with the number of workers hires, as shown below:
Number of workers Jeans (pairs/week)
0 0
1 25
2 45
3 60
4 72
5 80
6 85
1. If the shoes sell for $35 a pair and the competitive market wage is $250 per week, how many workers should Fabric hire? How many pairs of shoes will the company produce each week?
Complete the Table:
|
Q labor |
TPP |
MPP |
Price |
TRev |
MRP/VMP |
Labor Cost |
Material Cost |
Total Cost |
MRC |
Profit |
Below is a table showing the production numbers for a chair factory (where the production numbers are based on chairs being produced per day).
|
Workers |
Total Product (TP) |
Average Product (AP) |
Marginal Product (MP) |
Marginal Revenue Product (MRP) |
|
0 |
0 |
- |
- |
- |
|
1 |
10 |
|
|
|
|
2 |
|
15 |
|
|
|
3 |
|
|
40 |
|
|
4 |
|
35 |
|
|
|
5 |
190 |
|
|
|
|
6 |
|
|
30 |
|
|
7 |
240 |
|
|
|
|
8 |
250 |
|
|
|
|
9 |
|
|
5 |
|
a) Fill in the missing numbers for the TP, AP, and MP columns (round to the nearest chair)
b) In one sentence explain what the AP of 4 workers being 35 tells us.
c) In one sentence explain what your answer for MP of the 4th worker tells us.
d) Given the fact that each chair produced in our factory can be sold at the market price of $10 per chair, fill in the MRP column (round to the nearest dollar).
e) In one sentence explain what your answer for MRP for the 4th worker tells us.
f) If the market wage for workers doing manufacturing work (such as chair production) is $180 per day, determine the amount of workers this firm should hire to maximize its profit.
Explain your answer using MRP.
Below is a table showing the production numbers for a chair factory (where the production numbers are based on chairs being produced per day).
|
Workers |
Total Product (TP) |
Average Product (AP) |
Marginal Product (MP) |
Marginal Revenue Product (MRP) |
|
0 |
0 |
- |
- |
- |
|
1 |
10 |
|
|
|
|
2 |
|
15 |
|
|
|
3 |
|
|
40 |
|
|
4 |
|
35 |
|
|
|
5 |
190 |
|
|
|
|
6 |
|
|
30 |
|
|
7 |
240 |
|
|
|
|
8 |
250 |
|
|
|
|
9 |
|
|
5 |
|
a) Fill in the missing numbers for the TP, AP and MP columns (round to the nearest chair)
b) In one sentence explain what the AP of 4 workers being 35 tells us.
c) In one sentence explain what your answer for MP of the 4th worker tells us.
d) Given the fact that each chair produced in our factory can be sold at the market price of $10 per chair, fill in the MRP column (round to the nearest dollar).
e) In one sentence explain what your answer for MRP for the 4th worker tells us.
f) If the market wage for workers doing manufacturing work (such as chair production) is $180 per day, determine the number of workers this firm should hire to maximize its profit.
Explain your answer using MRP.
