ECO101H1 Lecture 2: Week 2
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A skilled handyman is currently running his own business without any employees. In an effort to boost his profit, the handyman is considering employing some hired workers so that he can complete more jobs each week. In the table below are the handyman's estimates on the number of jobs that could be completed if he hired up to five employees. In addition, he knows that each new job pays $350 per week, while each employee will be paid $25 per hour and work for 40 hours a week.
Number of employees | Jobs completed |
0 | 7 |
1 | 12 |
2 | 16 |
3 | 19 |
4 | 21 |
5 | 22 |
Assuming the goal of the handyman is to make the largest profit possible, the number of employees that should be hired is:
Use the following table to answer questions 4-8. Columns (1) and (2) show the short-run production function for a monopolist using a single variable input, labor. Columns (2) and (3) show the demand schedule. Total fixed cost is $1,800.
1 | 2 | 3 | 4 | 5 |
Labor/week | Output/week | Price | MRP | ARP |
0 | 0 | - | Ā | Ā |
1 | 50 | 20 | Ā | Ā |
2 | 110 | 18 | Ā | Ā |
3 | 150 | 16 | Ā | Ā |
4 | 180 | 15 | Ā | Ā |
5 | 200 | 14 | Ā | Ā |
6 | 210 | 13 | Ā |
Ā |
1. Calculate the MRP for each level of labor usage.
2. Calculate the ARP for each level of labor usage.
Assume the weekly wage is $150,
3. How much labor will the firm use?
4. How much will it produce?
5. What is the firm's profit (loss)?