Economics
5th Edition
ISBN: 9781319066604
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Question
Chapter 19, Problem 3P
To determine
Concept Introduction:
Production Function: This refers to the relationship of the inputs used in the production of a product with the output produced.
Marginal Product of Labor ( MPL ): This refers to the additional units of output produced when an additional unit of labor is employed in the current labor force.
The formula to calculate the marginal product of labor is:
Where,
is the change in quantity.
is the change in labor.
Value of Marginal Product of Labor ( VMPL ): This refers to the value of additional units of output produced when an additional unit of labor is employed in the current labor force.
The formula to calculate the value of marginal product of labor is:
Where,
- MPL is the marginal product of labor.
- P is the price.
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Students have asked these similar questions
Wolfgang is a typical producer in a perfectly
competitive piano industry (i.e., all other producers of
pianos face the same costs as Wolfgang). The
following production and cost data apply to the long run
as well as the short run. Fixed costs (rent) are
unrecoverable in the short run and are equal to $2400
per month. Variable costs consist of raw
materials (wire, wood, plastic), which cost $1000
per piano, and the $40 per hour opportunity cost
of Wolfgang's time. Wolfgang's production function is
given in the table at right.
Wolfgang will shut down if the price per piano is less
than
OA. $3000.
B. $4000.
O C. $5000.
○ D. None of the above.
Pianos (Q)
Hours (L)
Raw Materials (
0
0
0
1
100
1000
2
150
2000
3
240
3000
4
400
4000
P2
P₁
$ per unit
Using the graph below, determine which statement is TRUE.
MC1
SRATC₁
Q1
Q₂
MC2 SRATC2
LRAC
✓ LEA
Quantity
Using the grapns below, wnicn snow the snort-run cost curves for 3 perfectly competitive firms in the same industry, determine whether the industry is in long-run equilibrium or not.
Q
Q
Firm A
QA
MC
ATC
Output
Firm B
QB
MC
ATC
Firm C
MC
ATC
Output
Output
Qc
If Firms A, B and C are in the same industry, is this industry in long-run equilibrium?
○ A. Yes, because P = MC = MR for each of the 3 firms.
○ B. No, because Firm A is not producing at a profit-maximizing level of output.
○ C. Yes, because all 3 firms are producing at their minimum average total cost.
OD. The answer is uncertain since it's unknown whether the firms are producing at the minimum efficient scale or not.
○ E. No, because if the industry were in equilibrium, all 3 firms would be earning zero economic profits.
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