Consider a competitive, price-taking firm that employs only one variable input, labor, to produce a product that sells for $14 per unit. The wage rate is $24 per unit of labor and total fixed costs are $500. Fill in the blanks in each column of this table as instructed by the questions below a-Fill in the blanks in columns 3 and 5. Marginal product begins to diminish beyond ________ units of labor. Marginal product is negative for the _____th unit of labor. [Note: You will see later in this problem that the profitmaximizing level of labor usage does indeed occur well in the range of diminishing marginal product, but not into the range of negative marginal product. b- Compute marginal and average revenue products and fill in the blanks in columns 4 and 6. The sixth unit of labor __________________ (increases, decreases) _______________ (total, marginal) revenue by $__________. Decreasing labor usage from three to two units _______________ (increases, decreases) _______________ (total, marginal) revenue by $___________. c- The manager can maximize total revenue by hiring ________ units of labor. The maximum possible value of total revenue is $_
Consider a competitive, price-taking firm that employs only one variable input,
labor, to produce a product that sells for $14 per unit. The wage rate is $24 per unit
of labor and total fixed costs are $500. Fill in the blanks in each column of this
table as instructed by the questions below
a-Fill in the blanks in columns 3 and 5. Marginal product begins to diminish
beyond ________ units of labor. Marginal product is negative for the _____th
unit of labor. [Note: You will see later in this problem that the profitmaximizing
level of labor usage does indeed occur well in the range of
diminishing marginal product, but not into the range of negative marginal
product.
b- Compute marginal and average revenue products and fill in the blanks in
columns 4 and 6. The sixth unit of labor __________________ (increases,
decreases) _______________ (total, marginal) revenue by $__________.
Decreasing labor usage from three to two units _______________ (increases,
decreases) _______________ (total, marginal) revenue by $___________.
c- The manager can maximize total revenue by hiring ________ units of labor.
The maximum possible value of total revenue is $____________.
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