1.The Widget Company has the following production function.
Number of Workers
Number of Cases produced
0
0
1
9
2
17
3
24
4
30
5
35
If widgets sell for $6 each and the wage rate is $33, how many workers will the company hire?
2. Zowie! Surfboards have the following production function.
Number of Workers
Number of Surfboards Produced
1
12
2
21
3
29
4
36
5
42
If surfboards sell for $30 and the nominal wage rate is $200, how many workers should the firm employ?
3. The marginal product of labor (measured in units of output) for Expando Corp is given by MPN = A(400 - N) where A measures productivity and N is the number of labor hours used in production. Suppose the price of output is $3 per unit and A = 2.0. What will be the demand for labor if the nominal wage is $18?
4. The marginal product of labor (measured in units of output) for Relient Corp. is given by MPN = A(200 - N) where A measures productivity and N is the number of labor hours used in production. Suppose the price of output is $3 per unit and A = 2.0. What will be the demand for labor if the nominal wage is $30?
5. What is the participation rate if there are 125 million people in the labor force, 100 million people employed, and 25 million not in the labor force?
6. Last year, Linus earned a salary of $25,000 and he spent $24,000, thus saving $1000. At the end of the year, he received a bonus of $1000 and he spent $500 of it, saving the other $500. What was his marginal propensity to consume?
7. Calculate the user cost of capital of a machine that costs $5000 and depreciates at a rate of 25%, when the nominal interest rate is 10% and the expected inflation rate is 5%.
1.The Widget Company has the following production function.
| Number of Workers | Number of Cases produced |
| 0 | 0 |
| 1 | 9 |
| 2 | 17 |
| 3 | 24 |
| 4 | 30 |
| 5 | 35 |
If widgets sell for $6 each and the wage rate is $33, how many workers will the company hire?
2. Zowie! Surfboards have the following production function.
| Number of Workers | Number of Surfboards Produced |
| 1 | 12 |
| 2 | 21 |
| 3 | 29 |
| 4 | 36 |
| 5 | 42 |
If surfboards sell for $30 and the nominal wage rate is $200, how many workers should the firm employ?
3. The marginal product of labor (measured in units of output) for Expando Corp is given by MPN = A(400 - N) where A measures productivity and N is the number of labor hours used in production. Suppose the price of output is $3 per unit and A = 2.0. What will be the demand for labor if the nominal wage is $18?
4. The marginal product of labor (measured in units of output) for Relient Corp. is given by MPN = A(200 - N) where A measures productivity and N is the number of labor hours used in production. Suppose the price of output is $3 per unit and A = 2.0. What will be the demand for labor if the nominal wage is $30?
5. What is the participation rate if there are 125 million people in the labor force, 100 million people employed, and 25 million not in the labor force?
6. Last year, Linus earned a salary of $25,000 and he spent $24,000, thus saving $1000. At the end of the year, he received a bonus of $1000 and he spent $500 of it, saving the other $500. What was his marginal propensity to consume?
7. Calculate the user cost of capital of a machine that costs $5000 and depreciates at a rate of 25%, when the nominal interest rate is 10% and the expected inflation rate is 5%.
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Use the following table to answer questions 1 - 3.
| Number of Workers | Output | Marginal Product of Labor | Value of Marginal Product of Labor | Wage | Marginal Profit |
| 0 | 0 | ||||
| 1 | 100 | $1000 | $400 | $500 | |
| 2 | 80 | $800 | $400 | ||
| 3 | 60 | $400 | $100 | ||
| 4 | 280 | $400 | $400 | ||
| 5 | 20 | $400 |
1. What is the market price of the final good?
A. $5
B. $6
C. $8
D. $10
2. If the firm hires two workers, the two workers together produce
A. 80 units
B. 100 units
C. 180 units
D. 200 units
3. To maximize its profits, how many workers will the firm hire?
A. 2
B. 3
C. 4
D. 5
