Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 16, Problem 1P
To determine
The marginal product and the marginal revenue product of labor is to be completed in the table.
Expert Solution & Answer
Explanation of Solution
Marginal product of labor is the change in total labor due to an addition of one more unit of labor.
Initial labor is q1 and initial output is Q1
So, the increase in labor by one more unit is q1+1 and the output is increased to Q2. So the marginal product of labor will be equal to MP = Q2- Q1
Marginal revenue = MPXP
The table will be completed using the above equations.
| Quantity of labor (q) | Total Output(Q) | Marginal product of labor (MP) | Marginal revenue product of laborMRP = MP X $4 |
| 0 | |||
| 1 | 250 | 250 | $1000 |
| 2 | 600 | 350 | $1400 |
| 3 | 900 | 300 | $1200 |
| 4 | 1125 | 225 | $900 |
| 5 | 1300 | 175 | $700 |
| 6 | 1450 | 150 | $600 |
| 7 | 1560 | 110 | $440 |
Economics Concept Introduction
Marginal Product:
is defined as the change in the total output due to one unit change in the input.
Marginal Revenue:
is defined as the marginal product times the price of the product that is MP XP
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BEC 3701 - Assignments-...
KWAME NKRUMAH UNIVERSITY
TEACHING FOR EXCELLENCE
SCHOOL OF BUSINESS STUDIES
DEPARTMENT OF ECONOMICS AND FINANCE
ADVANCED MICRO-ECONOMICS (BEC 3701)
Assignments
INSTRUCTIONS:
Check instructions below:
LTE
1) Let u(q1,q2) = ln q₁ + q2 be the (direct) utility function, where q₁ and q2the two goods. Denote
P₁ and P2 as the prices of those two goods and let M be per period money income. Derive each of
the following:
a) the ordinary or Marshallian demand functions q₁ = d₂ (P₁, P₂, M) for i = 1,2 [3 Marks]
b) the compensated or Hicksian demand functions q₁ = h₂ (P₁, P2, M) for i = 1,2 [3 Marks]
c) the Indirect Utility Function uº = v(P₁, P2, M) [3 Marks]
d) the Expenditure Function E(P1, P2, U°) [3 Marks]
e) Draw a diagram of the solution. There should be two graphs, one above the other; the
first containing the indifference curves and budget constraint that characterize the
solution to the consumer's choice problem; the second characterizing the demand…
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