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Consider the table above. Assume that the resource and output markets are both perfectly competitive. The equilibrium price of the resource is $12.50 and the equilibrium price of the product is $0.50. How many units of the resource will be hired by a profit maximizing firm? a. 1 unit b. 2 units c. 3 units d. 4 units e. Not enough information provided.

Consider the table above. Assume that the resource and output markets are both perfectly competitive. The equilibrium price of the resource is $12.50 and the equilibrium price of the product is $0.50. How many units of the resource will be hired by a profit maximizing firm? a. 1 unit b. 2 units c. 3 units d. 4 units e. Not enough information provided.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider the table above. Assume that the resource and output markets are both perfectly competitive. The equilibrium price of the resource is $12.50 and the equilibrium price of the product is $0.50. How many units of the resource will be hired by a profit maximizing firm?

a. 1 unit
b. 2 units
c. 3 units
d. 4 units
e. Not enough information provided.
### Marginal Product Analysis This table demonstrates the relationship between the units of a resource utilized and the resulting total product output. It is a fundamental concept in economics often used to illustrate how different quantities of a production factor can affect output levels. #### Table: Relationship Between Units of Resource and Total Product | Units of Resource | Total Product | |-------------------|---------------| | 0 | 0 | | 1 | 50 | | 2 | 105 | | 3 | 140 | | 4 | 165 | **Explanation:** - **Units of Resource:** The left column represents the number of resource units employed in production. This could include labor, raw materials, or any other input necessary for creating a product. - **Total Product:** The right column indicates the total amount of product produced with the corresponding units of the resource. This is an aggregate measure showing the overall production output. **Observation:** - Initially, as the number of resource units increases from 0 to 1, the total product increases from 0 to 50. - With each additional unit of resource, total product increases, although the incremental gains may vary. - This table is useful for understanding concepts like marginal product, which refers to the additional output generated by adding one more unit of a resource. Understanding how resources impact total production allows businesses and economists to make informed decisions about resource allocation and efficiency improvements.
Transcribed Image Text:### Marginal Product Analysis This table demonstrates the relationship between the units of a resource utilized and the resulting total product output. It is a fundamental concept in economics often used to illustrate how different quantities of a production factor can affect output levels. #### Table: Relationship Between Units of Resource and Total Product | Units of Resource | Total Product | |-------------------|---------------| | 0 | 0 | | 1 | 50 | | 2 | 105 | | 3 | 140 | | 4 | 165 | **Explanation:** - **Units of Resource:** The left column represents the number of resource units employed in production. This could include labor, raw materials, or any other input necessary for creating a product. - **Total Product:** The right column indicates the total amount of product produced with the corresponding units of the resource. This is an aggregate measure showing the overall production output. **Observation:** - Initially, as the number of resource units increases from 0 to 1, the total product increases from 0 to 50. - With each additional unit of resource, total product increases, although the incremental gains may vary. - This table is useful for understanding concepts like marginal product, which refers to the additional output generated by adding one more unit of a resource. Understanding how resources impact total production allows businesses and economists to make informed decisions about resource allocation and efficiency improvements.
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