L Let MP marginal product of labor, P = output price, and W- wage, then the equation that represents the condition where a competitive firm would hire another worker is P × MP=W. O P × MP < W, O P × W >: MP. O P × MP > W.

L Let MP marginal product of labor, P = output price, and W- wage, then the equation that represents the condition where a competitive firm would hire another worker is P × MP=W. O P × MP < W, O P × W >: MP. O P × MP > W.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 15P

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Suppose that labor is the only input used by aperfectly competitive firm. The firm’s productionfunction is as follows:Days of Labor Units of Output0 days 0 units1 72 133 194 255 286 297 29a. Calculate the marginal product of each additionalworker.b. Each unit of output sells for $10. Calculate thevalue of the marginal product of each worker.c. Compute the demand schedule showing thenumber of workers hired for all wages from zeroto $100 a day.d. Graph the firm’s labor-demand curve.e. What happens to this demand curve if the price ofoutput rises from $10 to $12 per unit?
The following table shows the production function for a company. This company sells its product in a perfectly competitive product market at a price of $4 each and hire labor in a perfectly competitive labor market at a wage of $450 per week. Calculate the Marginal MarginalProduct of the 1st, 2nd, and 3rd. Calculate the Value ofMarginal Product of the 1st, 2nd, and 3rd How many workers should it hire? How do you know? Explain your answer. Show formulas and some of your calculations.
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2. a) The Value of the Marginal Product of Labour in a local bakery is VMPL = 20 – 0.5L, where "L" is the number of workers. If workers' wages are $10 per hour, how many will the bakery hire? b) What is the economic meaning of the value -0.5?
Suppose that the production function is Yt = AtKt^(1/2) Lt^(1/2) where Yt is output, Kt is the stock of capital and Lt is amount of labor firms hire. Assume that Kt = 100, At = 2. (a) Firms in this economy maximize their profits, given by revenue net of labor costs: Yt −WtLt . Derive the firm’s labor demand curve. (b) Workers in this economy maximize their utility, given by U(Ct , Nt) = log(Ct) − Nt , where Ct is consumption and Nt is the amount of labor workers supply. Their budget constraint is Ct = WtNt . Derive the workers’ labor supply curve. (c) Calculate the equilibrium wage rate and employment in this economy using the expressions for labor demand and supply you derived above. Also calculate the total amount of output the economy produces. (d) Suppose that capital doubles, to Kt = 200. Calculate what happens to the wage rate, employment and output. Illustrate the effects of this increase in capital graphically, using a labor demand/supply diagram.
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A profit-maximizing firm will hire workers up to the quantity of labor at which: O MRP W O MRP₁>W OMRP W OMP MR-MRPL
Explain why firms will experience diminishing marginal returns to labor in the short run.
From the production data in the table below, calculate the VMP, for the 2nd unit of labor. Assume the wage rate is $80 and the price of the firm's output is $5. (Give the numeric value only for your response; do not include commas, dollar signs, etc.) Capital Labor Output (Q) 100 100 1 20 100 44 100 66 100 4 84 100 96 100 104 100 7 98 Numeric Response
12. A firm uses capital and labour to produce widgets. In the short-run capital is fixed, while labour is variable. The short-run production function is X-L'+ 24L2+ 240L Where X is the number of widgets produced in per week, and L is the number of workers employed. Each worker works a 40-hour week. The wage rate is $12 per hour. a. Calculate the range of values for L over which the firm is in stage I, stage II and stage II b. what is the minimum product price at which the firm will operate in the short-run? c. The product price, over which the firm has no control, is such that the firm's maximum possible pure profit $ 1096 per week. In order to achieve that level of profit it must employ 16 workers. How much is the firm's total fixed cost?.
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