(a) Calculate the marginal (physical) product of the third worker. (b) Define the law of diminishing marginal returns and explain why it occurs. (c) Diminishing marginal returns first occur with the hiring of which worker for the firm?
(a) Calculate the marginal (physical) product of the third worker. (b) Define the law of diminishing marginal returns and explain why it occurs. (c) Diminishing marginal returns first occur with the hiring of which worker for the firm?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Marginal Revenue
Number of Workers
Product per, Day
1
$450
$500
$450
4
$400
5
$300
$100
The table above gives the short-run marginal revenue product of labor per day for a perfectly competitíve firm.
The firm is currently selling its product at the market price of $5.
(a) Calculate the marginal (physical) product of the third worker.
(b) Define the law of diminishing marginal returns and explain why it occurs.
(c) Diminishing marginal returns first occur with the hiring of which worker for the firm?
(d) What is the highest daily wage that the firm is willing to pay to hire the fifth worker?
(e) What will happen to the demand for labor if the market price of the product increases? Explain.
2.
3.
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