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
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 |
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 |
|||
Suppose that a monopoly firm finds that its MR is $72 for the first unit sold each day, $71 for the second unit sold each day, $70 for the third unit sold each day, and so on. Further suppose that the first worker hired produces 5 units per day, the second 4 units per day, the third 3 units per day, and so on.
Instructions: Enter your answers as whole numbers.
a. What is the firm's MRP for each of the first five workers?
| Worker | MRP, unregulated |
| 1 | |
| 2 | |
| 3 | |
| 4 | |
| 5 |
b. Suppose that the monopolist is subjected to rate regulation and the regulator stipulates that it must charge exactly $62 per unit for all units sold. At that price, what is the firm's MRP for each of the first five workers?
| Worker | MRP, regulated |
| 1 | |
| 2 | |
| 3 | |
| 4 | |
| 5 |
c. If the daily wage paid to workers is $258 per day, how many workers will the unregulated monopoly demand? Worker(s).
If the daily wage paid to workers is $258 per day, how many workers will the regulated monopoly demand? Worker(s).
Looking at those figures, will the regulated or the unregulated monopoly demand more workers at that wage? Unregulated/Regulated.
d. If the daily wage paid to workers falls to $121 per day, how many workers will the unregulated monopoly demand? Worker(s).
If the daily wage paid to workers falls to $121 per day, how many workers will the regulated monopoly demand? Worker(s).
Looking at those figures, will the regulated or the unregulated monopoly demand more workers at that wage? Unregulated/Regulated.
e. Comparing your answers to parts c and d, does regulating a monopoly's output price always increase its demand for resources? Yes/No.
