EC 201 Lecture Notes - Lecture 9: Marginal Product, Marginal Cost

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crimsonwallaby906

17 Feb 2016

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Farmer increased labor input from 7000 to 8000 hours and output increased by 10000 bushels. An additional hours of labor produced how many bushels: 1000:10000=1:x, 1000x=10000, x=10, marginal product. If a wage is per hour, then each additional bushels costs how many to produce: 10/10 bushel=1. If a wage is per hour, then each additional bushel costs how many to produce: 20/10 bushel=2. Average costs are the slope of the line connecting any point on the total cost curve and the origin. Average cost curves with ixed costs are u-shaped. Increasing marginal cost and u-shape or average cost for graphs. When they intersect, the equilibrium will determine.

Related Questions

5. For the last 70 years the U.S. government has used price supports to provide income assistance to American farmers. At times the government has used price floors, which it maintains by buying up the surplus farm products. At other times, it has used target prices, a policy by which the government gives the farmer an amount equal to the difference between the market price and the target price for each unit sold. Consider the market for corn depicted in the accompanying figure.

Price of corn quantity of corn (bushels) Per bushel demand supply
$5 800 1200
4
3 1000 1000
2
1 1200 800
0

a. If the government sets a price floor of $5 per bushel, what does that mean and how will it affect supply and demand (illustrate on the supply and demand curve below)? How many bushels of corn are produced by the farmer? How many bushels of corn are purchased by consumers and at what price? How many bushels of corn are purchased by the government and at what price? How much does the program cost the government? How much revenue do corn farmers receive? (10points)

b. Suppose the government sets a target price of $5 per bushel for any quantity supplied up to 1,000 bushels What does that mean and how will it affect supply and demand (illustrate on the supply and demand curve below)? How many bushels of corn are purchased by consumers and at what price? How many bushels of corn are purchased by the government, if any? How much does the government pay the farmer and at what price? How much revenue do corn farmers receive? (10 points)

c. Which of these programs (in parts a and b) costs corn consumers more? Explain.
Which program costs the government more? Explain. What are the inefficiencies that arise in each of these cases (parts a and b)? (20 points)

plumalpaca673

The Zippy Paper Company has no control over either the price of paper or the wage it pays its workers. The following table shows the relationship between the number of workers Zippy hires and total output:

Assuming the selling price is $10 per box, answer the following questions:

a. What is the marginal revenue product (MRP) of each worker?

b. How many workers will Zippy hire if the wage rate is $100 per day?

c. How many workers will Zippy hire if the wage rate is $75 per day?

d. Assume the wage rate is $75 per day and the price of a box of paper is $20. How many workers will Zippy hire?

You should start by duplicating the chart on your sheet. You will then need to find the marginal product. Multiplying the marginal product by the price will give you the marginal revenue product.

Labor Input (workers per day)	Total Output (boxes of paper per day)	Marginal Product	Price	MP x P = MRP Marginal Revenue Product
0	0

1	15

2	27

3	36

4	43

5	48

tanhyena562

First scenario: output price is given

The table (below) gives the total output, per hour, for anywhere from 0 to 17 workers.

You need to determine how many workers should be hired at five different wage rates, ranging from $13/hour up to $25/hour. The wage rate includes all relevant benefits. To get to this answer you will need to calculate the marginal product of labor and the marginal revenue product of labor. You will be entering the values you obtain for the boldy outlined celles into the Moodle submission area.


Cost of the other (non-labor) inputs that go into a case (and would need to be increased if more labor was hired and output increased) =			$13.00
Price received per case =			$15.00

Marginal product of labor is the change in total product when labor is increased by one.
Marginal Revenue Product (net of the cost of the other required inputs), when the output price is fixed) equals marginal product times the ((fixed) output price -$13)

Please note: A few of the table values are filled in. Use these to determine if your approach to the problem is correct.

Number of workers	Total product	Marginal product of labor	Marginal Revenue Product (net of the cost of the other required inputs)
0	0
1	10	10
2	21	11	$22.00
3	33	12	$24.00
4	46	13	$26.00
5	60	14	$27.00
6	75	15	$30.00
7	91	16	$32.00
8	106	15	$30.00
9	120	14	$28.00
10	133	13	$26.00
11	145	12	$24.00
12	156	11	$21.00
13	165	9	$18.00
14	172	7	$14.00
15	177	5	$10.00
16	179	2	$4.00
17	179	0	$0.00



	Using the information from above, fill in the following 'derived demand' schedule:

	Hourly wage	Number of workers to maximize profits
	$13.00	15
	$17.00	13
	$21.00	12
	$23.00	11
	$25.00	10

silverprairie-dog389

EC 201 Lecture Notes - Lecture 9: Marginal Product, Marginal Cost

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