1. Which of the following is characteristic of the marginal revenue product schedule for a resource?
a. It approximates the firm's demand curve for the resource.
b. It measures the change in total revenue resulting from employing an additional unit of the resource.
c. It is determined by multiplying the marginal product of the resource by the marginal revenue of the good produced.
d. All of these are true.
2. Assume Ajax Company employs 100 workers and the total revenue is $400,000 per week. When Ajax Company employs 101 workers, the total revenue is $405,000. The marginal revenue product of the 101st worker is:
a. $40,000.
b. $5,000.
c. $405,000.
d. none of these.
3. The optimal number of workers to be hired by a firm operating in a competitive labour market is where:
a. P = MRP.
b. MP = MRP.
c. MRP = w.
d. P = w.
1. Which of the following is characteristic of the marginal revenue product schedule for a resource?
a. It approximates the firm's demand curve for the resource.
b. It measures the change in total revenue resulting from employing an additional unit of the resource.
c. It is determined by multiplying the marginal product of the resource by the marginal revenue of the good produced.
d. All of these are true.
2. Assume Ajax Company employs 100 workers and the total revenue is $400,000 per week. When Ajax Company employs 101 workers, the total revenue is $405,000. The marginal revenue product of the 101st worker is:
a. $40,000.
b. $5,000.
c. $405,000.
d. none of these.
3. The optimal number of workers to be hired by a firm operating in a competitive labour market is where:
a. P = MRP.
b. MP = MRP.
c. MRP = w.
d. P = w.
Related textbook solutions
Related questions
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 |
|||
A purely competitive firm faces the marginal product schedule shown in the table below. The price of the product is $25 and the wage rate is $300 per worker.
Calculate the marginal revenue product and complete the table. (Enter your responses as whole numbers.)
|
Workers |
Marginal Product (MP) |
Marginal Revenue Product (MRP) |
|
10 |
2424 |
$ |
|
11 |
2020 |
?? |
|
12 |
1616 |
?? |
|
13 |
1212 |
?? |
|
14 |
88 |
?? |
|
15 |
44 |
?? |
The firm should hire
A. 14 workers
B. 11 workers
C. 13 workers
D. 15 workers
Assume that the firm only uses labor as a resource in production and is hiring workers in a purely competitive labor market. In other words, the firm can hire as many workers as it wishes without affecting the equilibrium wage rate.
|
Units of Labor (L) |
Total Product (Q) |
Product Price (P) |
Total Revenue (TR) |
Marginal Revenue Product (MRP) |
|
0 |
0 |
$2.20 |
$0 |
--- |
|
1 |
15 |
$2.00 |
$30 |
$30 |
|
2 |
28 |
$1.80 |
||
|
3 |
39 |
$1.60 |
||
|
4 |
48 |
$1.40 |
||
|
5 |
55 |
$1.20 |
||
|
6 |
60 |
$1.10 |
a. Is the firm selling its product in a purely competitive market or an imperfectly competitive market?
b. Fill out both the TR and MRP columns with the correct values.
c. Suppose the wage rate is $11.00 per worker. How many workers should be employed, in order to maximize profits?
d. If the firm hires the optimum number of workers, what is its total profit?