Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 25, Problem 2CQ
To determine
Explain how the firm takes decision regarding employing additional unit of resources.
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define marginal product of labor and value of the marginal product of labor.describe how a competitive,profit-maximizing firm decides how many workers to hire.
Labor demand In the long-run:describe what a firm will do when its long-run
condition is not met, i.e, when will it hire more or less labor?
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Consider a firm that exists for one period. The value of labour's marginal product is given by: VMP =Px MP, where P is the price of
output, and MPL = 20 - 0.1L. The wage rate is $20. Assume that there are hiring and training costs of $40 per worker. If the firm
expects the price of output to be $25, what is the optimal level of employment?
Important note: Your answer needs to be rounded to 2 decimal places (e.g. 1.23). Any intermediate results should be rounded to at least 4
decimal places. Failure to do so may result in your answer not being accepted as a correct one.
Chapter 25 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- 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_forwardWhich of the following events may increase the marginal product of labor? Check all that apply. An increase in the wage rate A technological improvement that is complementary for this type of labor A technological improvement that is substitutable for the labor in this market Good weather causes an increase in supply and a fall in price for one of the inputs used to make the goodarrow_forward(a) Why does the labour demand curve slope downwards? (b) A garment factory’s production function is provided in the table.The gross profit per unit (difference between selling price and material cost, but not including the cost of labour) is $100. # Workers Output 1 20 2 36 3 48 4 56 5 60 6 62 (i) If the wage rate is $1,000 a week, how many workers should the factory hire? (ii) If a surge in popularity for the factory’s brand allows them to raise the product price such that the gross profit rises to $150, how many workers will the factory hire now? (iii) Calculate the number of garments produced in each of the two cases above.arrow_forward
- High Tech, Inc. produces plastic chairs that sell for $10 each. The following table provides information about how many plastic chairs can be produced per hour. Number of Workers Chairs Produced per Hour 1 10 2 18 3 24 4 28 5 30 Please enter your answers for Value of the Marginal Product as numerical answers rounded to the nearest dollar (ie. 30 or $30, not "Thirty dollars." When answering how many workers the firm will hire just enter a number from 0-5 and nothing else (ie. 4 not "Four" or "Four workers"). What is the "Value of the Marginal Product" (VMP) for the third worker? What is the Value of the Marginal Product (VMP) for the fifth worker? How many workers will this firm hire if the hourly wage rate for workers is $70/hour How many workers will this firm hire if the hourly wage rate for workers is $50/hourarrow_forwardFollowing is information on the production levels of three different firms. Firm A is currentlyproducing at a quantity where it is experiencing increasing returns. Firm B is currentlyproducing at a quantity where it is experiencing diminishing returns. Firm C is currentlyproducing at a quantity where it is experiencing negative returns.a. If each of the firms cut back on its labor force, what will happen to its marginalproduct of labor? And why?b. If each of the firms adds to its labor force, what will happen to its marginal product oflabor? And why?arrow_forwardThe following table depicts the weekly output of a firm that manufactures computer printers. The printers sell for $100 each. Calculate the marginal product and the marginal revenue product, and then fill in the blanks in the table below. Instructions: Enter your answers as a whole number. Labor Input (Workers per Week) Total Output Marginal Revenue Product Marginal Product |(Printers per Week) 10 200 11 218 12 234 13 248 14 260 15 270 16 278 If the weekly wage paid to workers is $1,600, the optimal number of workers hire isarrow_forward
- “The firm’s demand schedule for labour is a negative function of the wage because, as the firm uses more labour, it has to utilize poorer-quality labour, and hence pays a lower wage.” True or false? Explain.arrow_forwardIn some extreme cases, an individual’s labor supply curve may be downward sloping at higher hourly wage rates. That is, further increases in the worker’s wage lead them to work fewer hours. Why might an individual worker exhibit such behavior?arrow_forwardno handwritten notesarrow_forward
- Suppose the firm only produces good X and that the price of good Y, a substitutegood, decreases. What will happen to the optimal quantity of labor the firm willhire? Explain.arrow_forwardWhat is meant by the supply of labour to an occupation?arrow_forwardDistinguish the different Determinants of Labor Supply and Labor Demands. Give a short explanation of this simple graph. Wages £/hour Wage Q Quantity of Copyright: www.economicsonline.co.uk Labourarrow_forward
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