Chapter 69, Problem 1FRQ

a)

To determine

The marginal revenue product of labor of the 3^rd worker.

Answer to Problem 1FRQ

The marginal revenue product of labor of the 3^rd worker is $2,250.

Explanation of Solution

As an umbrella is sold at $15, the table would represent the following data:

Q (labor)	Q (umbrella)	Marginal product
0	0	0
1	300	300
2	550	250
3	700	150
4	800	100
5	850	50
6	890	40

  $\begin{array}{l}\text{MRPL = Marginal product of labor }\times \text{Marginal revenue}\text{.}\\ \begin{array}{l} =150\times \$15\hfill \\ =\$2,250\hfill \end{array}\end{array}$

Therefore, the marginal revenue product of labor of the 3^rd worker is $2,250

Economics Concept Introduction

Introduction: A demand curve is a graphical representation that shows how sensitive demand is toward the price of a good or service.

Marginal revenue is the earning or benefit which is obtained by using an additional unit of the product or factor of production.

b)

To determine

The correctly labeled graph shows the firm’s demand curve for labor.

Explanation of Solution

By using a marginal product and price of $15 the MRPL would be:

Q (labor)	Q (umbrella)	Marginal product	MRPL at $15
0	0	0	0
1	300	300	4500
2	550	250	3750
3	700	150	2250
4	800	100	1500
5	850	50	750
6	890	40	600

From the data in the table, the graph will show MRPL curve downward because by using extra units of labor, the change in total output started to decline, which makes the slope downward. And, here, the price of output is also constant at $15 by hiring more labor, which causes the demand curve to slope downward.

Therefore, the graphical presentation of data is as follows:

Economics Concept Introduction

Introduction: A demand curve is a graphical representation that shows how sensitive demand is toward the price of a good or service.

Labor is the human capital or human resource that is the factor of production for any firm.

c)

To determine

The demand curve for labor if the price of umbrellas increases to $20.

Explanation of Solution

When the price increase to $20 then, the MRPL would be:

Q (labor)	Q (umbrella)	Marginal product	MRPL at $20
0	0	0	0
1	300	300	6000
2	550	250	5000
3	700	150	3000
4	800	100	2000
5	850	50	1000
6	890	40	800

From the data in the table, the graph will show the new MRPL curve downward and shift to the right because by increasing the price to $20 with the use of extra units of labor, the change in total output started to decline, which makes the curve slope downward. And, here, the price of output is also constant at $20 by hiring more labor, which causes the demand curve to slope downward.

Therefore, the graphical presentation of data is as follows:

Economics Concept Introduction

Introduction: A demand curve is a graphical representation that shows how sensitive demand is toward the price of a good or service.

Labor is the human capital or human resource that is the factor of production for any firm.

d)

To determine

The total quantity that will be produced with each quantity of labor when technological advance doubles the productivity of workers

Answer to Problem 1FRQ

The total quantity that will be produced with each quantity of labor when technological advance doubles the productivity of workers would be 600, 1100, 1400, 1600, 1700, and 1780.

Explanation of Solution

The table would represent the following data when the quantity is doubled:

Q (labor)	Q (umbrella)	New quantity which doubles the old
0	0	0
1	300	600 (300×2)
2	550	1,100 (550×2)
3	700	1400 (700×2)
4	800	1600
5	850	1700
6	890	1780

Therefore, by doubling the number of umbrellas, at each quantity of labor, the total quantity will be produced as 600, 1100, 1400, 1600, 1700, and 1780.

Economics Concept Introduction

Introduction: Total quantity is the output that is obtained by using the units of the factor of production.