
(a)
Complete the table.
(a)

Explanation of Solution
The marginal product is the additional output produced due to the employment of an additional unit of labor. The marginal product can be obtained using Equation 1 as given below:
Substitute the respective values in Equation (1) to calculate the marginal product.
The marginal product of first worker is 20.
Total revenue can be calculated using Equation (2) as follows:
Substitute the respective values in Equation (2) to calculate the total revenue.
The total revenue from one worker is $240.
When the price of the soccer ball is $12 per ball, the marginal revenue product can be calculated using Equation (3) as follows:
Substitute the respective values in Equation (3) to calculate the marginal revenue product.
The marginal revenue product of first labor is $240.
Table 1 shows the values of marginal product, total revenue, and marginal revenue product, which are obtained using Equations (1), (2), and (3).
Table 1
Number of Workers | Number of Soccer Balls Produced Per Day | Marginal Product | Total Revenue | Marginal Revenue Product |
0 | 0 | — | $0 | — |
1 | 20 | 20 | 240 | $240 |
2 | 50 | 30 | 600 | 360 |
3 | 90 | 40 | 1,080 | 480 |
4 | 140 | 50 | 1,680 | 600 |
5 | 180 | 40 | 2,160 | 480 |
6 | 210 | 30 | 2,520 | 360 |
7 | 238 | 28 | 2,856 | 336 |
8 | 256 | 18 | 3,072 | 216 |
9 | 270 | 14 | 3,240 | 168 |
10 | 280 | 10 | 3,360 | 120 |
Marginal product: Marginal product is defined as the additional output produced by increasing the input factor by one unit.
Marginal revenue product: Marginal revenue product is defined as the additional revenue earned by a firm using one additional unit of an input.
Total revenue: Total revenue is defined as the total income earned from the sale of output produced.
(b)
Marginal revenue product.
(b)

Explanation of Solution
Substitute the respective values in Equation (2) to calculate the total revenue.
The total revenue from four workers is $1,680.
Substitute the respective values in Equation (2) to calculate the total revenue.
The total revenue from four workers is $2,160.
The marginal revenue product can be calculated using Equation (4) as follows:
Substitute the respective values in Equation (4) to calculate the marginal revenue product.
The marginal revenue product of fifth worker is $480.
Calculation of marginal revenue product using marginal product.
Substitute the respective values in Equation (4) to calculate the marginal revenue product.
The marginal revenue product of fifth worker is $480.
Thus, it is verified that marginal revenue product can be calculated using both methods.
Marginal product: Marginal product is defined as the additional output produced by increasing the input factor by one unit.
Marginal revenue product: Marginal revenue product is defined as the additional revenue earned by a firm using one additional unit of an input.
(c)
The numbers of workers to be hired.
(c)

Explanation of Solution
The firm should hire workers as long as the marginal revenue product of labor is greater than the wage rate. If the firm continues operation, at wage rate equal to $320, the firm should employ 7 workers. This is because the marginal revenue product of the 7th worker is $336, and when the 8th laborer is employed, the marginal revenue product of labor falls to $216.
Marginal revenue product: Marginal revenue product is defined as the additional revenue earned by a firm using one additional unit of an input.
(d)
The numbers of workers to be hired.
(d)

Explanation of Solution
When the wage rate increases to $400, the number of workers to be hired reduces to 5. The marginal revenue product of the 5th laborer is $480, which is greater than the wage rate. When the 6th worker is employed, the marginal revenue product falls to $360, which is less than wage rate.
Marginal revenue product: Marginal revenue product is defined as the additional revenue earned by a firm using one additional unit of an input.
(e)
The marginal product and marginal revenue product.
(e)

Explanation of Solution
When the firm uses new production technology, the marginal product of labor and the marginal revenue product of labor by 50 percent at each worker. When the wage rate is $400, the firm should hire seven workers. The marginal revenue product of the 7th worker is $504, which is higher than the wage rate.
Marginal product: Marginal product is defined as the additional output produced by increasing the input factor by one unit.
Marginal revenue product: Marginal revenue product is defined as the additional revenue earned by a firm using one additional unit of an input.
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Chapter 10 Solutions
Principles Of Microeconomics
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