Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 10, Problem 1.2P
To determine
Marginal product and marginal revenue product.
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You are given the following schedule for the production of pens by a firm
Labor Total Product
0 0
1 20
2 50
3 70
4 80
5 85
6 82
If pen sells for Rs 3 per unit and workers can be hired in a competitive labor market for Rs30
per day, how many workers should be hired? Explain your answers clearly.
Coldbox Corporation hires its workers in a perfectly competitive labor market and produces and sells frozen peas in a perfectly competitive product market. The market price for frozen peas is $4 per bag. The table below shows Coldbox' short-run production of frozen peas. Labor is the only variable input. Coldbox Corporation's fixed cost is $500.
Number of Workers
Bags of frozen peas
0
0
1
60
2
140
3
250
4
320
5
380
6
400
a) If the wage is $200 per worker, identify the profit-maximizing number of workers for Coldbox. Explain using marginal analysis.
b) If the price of frozen peas decreases by $2 per bag, would the number of workers hired by Coldbox be more than, less than, or equal to the number of workers you identified in part (a) ? Explain.
c) Suppose that Coldbox hires workers from a monopsonistic labor market. Would the wage be higher, lower, or equal to the equilibrium wage in a perfectly competitive market? Explain.
Chapter 10 Solutions
Principles of Economics (12th Edition)
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- help question 7arrow_forwardUsing the information from the table below, what is the marginal cost of increasing output from 32 to 40 knit scarves per week if the weekly wage is $200? [Table description: The first column contains number of workers. The second column shows output. The third and fourth column contain average product and marginal product, respectively.] Number Average Marginal Product of workers Output Product 0 0 2 3 A 5 10 10 10 10 12 22 22 11 10 32 10.67 40 10 46 9.2 Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer a $50 b $25 525 c $200 d $4arrow_forwardPlease answer quicklyarrow_forward
- 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.arrow_forwardCalculate the marginal product of labor (MPL) of each worker, and then plot the MPL curve on the following graph using the blue points (circle symbol). Note: Remember to plot each point halfway between two integers. For example, when the number of workers increases from 0 to 1, the MPL of the first worker should be plotted with a horizontal coordinate of 0.5, the value halfway between 0 and 1. Line segments will automatically connect the points. 100 06 MPL 80 70 60 50 40 30 20 10 4 5 LABOR (Number of workers) The following graph shows the demand for labor for three different prices per shovel: 150 135 120 105 75 60 2.5, 40 45 30 15 3 LABOR (Number of workers) Given the company's marginal product of labor curve shown on the second graph, line graph shows Gopher's demand for labor when the price of a shovel is $0.50, and line Gopher's demand for labor when the price of a shovel is $1.50. on this shows MPL (Shovels per worker) WAGE (Dollars per worker)arrow_forwardIn the short run, a tool manufacturer has a fixed amount of capital. Labor is a variable input. The cost and output structure that the firm faces is shown in the table below. Assume the product price is $2. a. Calculate the marginal revenue product and the marginal resource cost, and then fill in the blanks in the labor supply table. Instructions: Enter your answers as a whole number. Marginal Marginal Resource Units of Total Labor Marginal Product Wage Rate Total Product Revenue Labor Cost Product (Labor) Cost 10 200 $11 $110 11 220 20 12 132 12 238 18 13 156 13 254 16 14 182 14 268 14 15 210 15 280 12 16 240 b. What are the equilibrium wage rate and level of employment? Equilibrium wage rate = $ %3D Equilibrium level of employment workersarrow_forward
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