Quantities Produced 225 220 215 210 205 200 195 190 185 180 175 170 165 160 155 150 145 140 135 130 125 120 115 110 105 100 95 90 85 80 75 70 65 60 55 50 45 40 35 25 20 15 1 The graph above shows the relationship between the daily quantities of a good produced by a small firm and the number of workers hired, given all the other resources available to the firm. For example, one worker can produce 30 units and two workers can produce 55 units. Such a relationship between a production factor (here labor) and the amount of output produced is called a production function. Currently the nominal wage rate is W = $200 per worker per day and the price of the product is P = $10 per unit. 3 Number of Workers Now suppose that the firm installs some new machines and offers the workers some rigorous training and as a result the productivity of the workers increases. In particular, the marginal product of each worker doubles. After the increase in productivity, and all else the same, the firm will hire workers to maximize its profit. The firm will now produce additional units of output. productivity. Of the amount of increase in production noted above, the increase in the number of workers hired and units are merely due to units due to the increase in
Quantities Produced 225 220 215 210 205 200 195 190 185 180 175 170 165 160 155 150 145 140 135 130 125 120 115 110 105 100 95 90 85 80 75 70 65 60 55 50 45 40 35 25 20 15 1 The graph above shows the relationship between the daily quantities of a good produced by a small firm and the number of workers hired, given all the other resources available to the firm. For example, one worker can produce 30 units and two workers can produce 55 units. Such a relationship between a production factor (here labor) and the amount of output produced is called a production function. Currently the nominal wage rate is W = $200 per worker per day and the price of the product is P = $10 per unit. 3 Number of Workers Now suppose that the firm installs some new machines and offers the workers some rigorous training and as a result the productivity of the workers increases. In particular, the marginal product of each worker doubles. After the increase in productivity, and all else the same, the firm will hire workers to maximize its profit. The firm will now produce additional units of output. productivity. Of the amount of increase in production noted above, the increase in the number of workers hired and units are merely due to units due to the increase in
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Quantities Produced
225
220
215
210
205
200
195
190
185
180
175
170
165
160
155
150
145
140
135
130
125
120
115
110
105
100
95
90
85
80
75
70
65
60
55
50
45
40
35
30
0
1
2
3
Number of Workers
units of output.
productivity.
The graph above shows the relationship between the daily quantities of a good produced by a small
firm and the number of workers hired, given all the other resources available to the firm. For
example, one worker can produce 30 units and two workers can produce 55 units. Such a
relationship between a production factor (here labor) and the amount of output produced is called a
production function. Currently the nominal wage rate is W = $200 per worker per day and the price
of the product is P = $10 per unit.
Of the amount of increase in production noted above,
4
Now suppose that the firm installs some new machines and offers the workers some rigorous
training and as a result the productivity of the workers increases. In particular, the marginal product
of each worker doubles. After the increase in productivity, and all else the same, the firm will hire
workers to maximize its profit. The firm will now produce additional
the increase in the number of workers hired and
5
6
units are merely due to
units due to the increase in
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