Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 18, Problem 7PA
Subpart (a):
To determine
The profit-maximizing amount of labor.
Subpart (b):
To determine
The profit-maximizing amount of labor.
Subpart (c):
To determine
The profit-maximizing amount of labor.
Subpart (d):
To determine
The profit-maximizing amount of labor.
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Taco King produces tacos
The market for tacos is perfectly competitive, and the price is $3.50 a taco. The labor market is competitive, and the wage
rate is $105.00 a day
The table shows part of the workers total product schedule
Calculate the marginal product of hiring the third worker and the value of the marginal product of the third worker
The marginal product of hiring the third worker is tacos a day
The value of the marginal product of the third worker is
Saday
1
C
Workers
2
3
4
5
6
Tacos
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44
80
110
134
146
Suppose Fred produces 500 litres of milk every day with 10 workers. The price of milk is $12 per litre, and each worker is paid $550 daily.
If the marginal product of the last worker employed is 40 litres of milk, explain whether Fred is maximizing his profit. If not, can Fred increase his profit by employing more or fewer workers?
If Fred buys more dairy cattles, how will it affect his demand for labor? Explain with a diagram.
I Collado Lumber Company is producing tons of lumber per day. The following table is the costs of production. The managers currently have six machines. The price of output is $5 per unit. The wage of the worker is $55 per worker. From economic theory, we know that the value of the marginal product is price times the marginal product of labor. According to economic theory, a worker should be hired if the value of the marginal product is greater than the marginal cost of hiring a worker.
See the table below.
Number of machines
Number of workers
Output
The marginal product of labor
VMP
Wage
Marginal cost of hiring an additional worker
6
0
0
xxx
xxx
$55.00
xxx
6
1
2
2
$10.00
$55.00
$55.00
6
2
14
12
$60.00
$55.00
$55.00
6
3
30
16
$80.00
$55.00
$55.00
6
4
42
12
$60.00
$55.00
$55.00
6
5
50
8
$40.00
$55.00
$55.00
6
6
56
6
$30.00
$55.00
$55.00
6…
Chapter 18 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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