ARE 2150 Study Guide - Final Guide: Isoquant, Perfect Competition
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1. Give three ways that a business could increase the Marginal Revenue Product of Labor. 2. There is enough demand for cookies at Henionâs that the owner thinks he might be able to justify installing another oven. Estimates of output for different numbers of workers with one oven and with two are shown in the table below. After taking account of the cost of ingredients, Henionâs sells each cookie for $1. a. Graph the value of total output with one and with ovens. i. What happens to output for any number of workers with two ovens? What happens to the rate of change in output? ii. What happens the slope of the curve as more workers are hired? Why? b. Use the data in the graph to answer the following: i. How many workers will be hired and how many ovens made with one board and a wage of $14? With a wage of $20? ii. How many workers will be hired and how many cookies made with two boards and a wage of $14? With a wage of $20?
Workers | Cookies one oven | MP one oven | MRP one oven | Cookies, two ovens | MP two ovens | MRP two ovens |
1 | 20 | 30 | ||||
2 | 38 | 58 | ||||
3 | 54 | 84 | ||||
4 | 68 | 108 | ||||
5 | 80 | 130 | ||||
6 | 90 | 150 | ||||
7 | 98 | 168 | ||||
8 | 104 | 184 | ||||
9 | 108 | 198 | ||||
10 | 110 | 210 |