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29 Oct 2020
What is the average product of labor at 5 units of X, if labor increased from 2 to 8 and product increased from 2 to 5?
What is the average product of labor at 5 units of X, if labor increased from 2 to 8 and product increased from 2 to 5?
Paramjeet ChawlaLv8
29 Oct 2020
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| Ā | First scenario: output price is given | Ā | Ā | Ā | Ā | Ā | Ā | |
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| Ā | The table (below) gives the total output, per hour, for anywhere from 0 to 17 workers. | Ā | Ā | Ā | Ā | |||
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| Ā | You need to determine how many workers should be hired at five different wage rates, ranging from $13/hour up to $25/hour. The wage rate includes all relevant benefits. To get to this answer you will need to calculate the marginal product of labor and the marginal revenue product of labor. You will be entering the values you obtain for the boldy outlined celles into the Moodle submission area. | |||||||
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| Ā | Cost of the other (non-labor) inputs that go into a case (and would need to be increased if more labor was hired and output increased) = | $13.00 | Ā | Ā | Ā | Ā | ||
| Ā | Price received per case = | $15.00 | Ā | Ā | Ā | Ā | ||
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| Ā | Marginal product of labor is the change in total product when labor is increased by one. | Ā | Ā | Ā | Ā | |||
| Ā | Marginal Revenue Product (net of the cost of the other required inputs), when the output price is fixed) equals marginal product times the ((fixed) output price -$13) | |||||||
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| Ā | Please note: A few of the table values are filled in. Use these to determine if your approach to the problem is correct. | Ā | Ā | |||||
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| Ā | Number of workers | Total product | Marginal product of labor | Marginal Revenue Product (net of the cost of the other required inputs) | Ā | Ā | Ā | Ā |
| Ā | 0 | 0 | Ā | Ā | Ā | Ā | Ā | Ā |
| Ā | 1 | 10 | 10 | Ā | Ā | Ā | Ā | Ā |
| Ā | 2 | 21 | 11 | $22.00 | Ā | Ā | Ā | Ā |
| Ā | 3 | 33 | 12 | $24.00 | Ā | Ā | Ā | Ā |
| Ā | 4 | 46 | 13 | $26.00 | Ā | Ā | Ā | Ā |
| Ā | 5 | 60 | 14 | $27.00 | Ā | Ā | Ā | Ā |
| Ā | 6 | 75 | 15 | $30.00 | Ā | Ā | Ā | Ā |
| Ā | 7 | 91 | 16 | $32.00 | Ā | Ā | Ā | Ā |
| Ā | 8 | 106 | 15 | $30.00 | Ā | Ā | Ā | Ā |
| Ā | 9 | 120 | 14 | $28.00 | Ā | Ā | Ā | Ā |
| Ā | 10 | 133 | 13 | $26.00 | Ā | Ā | Ā | Ā |
| Ā | 11 | 145 | 12 | $24.00 | Ā | Ā | Ā | Ā |
| Ā | 12 | 156 | 11 | $21.00 | Ā | Ā | Ā | Ā |
| Ā | 13 | 165 | 9 | $18.00 | Ā | Ā | Ā | Ā |
| Ā | 14 | 172 | 7 | $14.00 | Ā | Ā | Ā | Ā |
| Ā | 15 | 177 | 5 | $10.00 | Ā | Ā | Ā | Ā |
| Ā | 16 | 179 | 2 | $4.00 | Ā | Ā | Ā | Ā |
| Ā | 17 | 179 | 0 | $0.00 | Ā | Ā | Ā | Ā |
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| Ā | Ā | Using the information from above, fill in the following 'derived demand' schedule: | Ā | Ā | ||||
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| Ā | Ā | Hourly wage | Number of workers to maximize profits | Ā | Ā | Ā | Ā | Ā |
| Ā | Ā | $13.00 | 15 | Ā | Ā | Ā | Ā | Ā |
| Ā | Ā | $17.00 | 13 | Ā | Ā | Ā | Ā | Ā |
| Ā | Ā | $21.00 | 12 | Ā | Ā | Ā | Ā | Ā |
| Ā | Ā | $23.00 | 11 | Ā | Ā | Ā | Ā | Ā |
| Ā | Ā | $25.00 | 10 | Ā | Ā | Ā | Ā | Ā |
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Quality of labor (workers) |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
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Total product (units per hour) |
0 |
2 |
5 |
9 |
15 |
18 |
17 |
The table above shows the total product schedule for The X Firm. Decreasing marginal returns occur with the ________ worker because ________.
a. 6th; output starts to decline.
b. 6th; the marginal product of labor is greater than the average product of labor.
c. 5th; the marginal product of labor for the 5th worker is less than the marginal product of the 4th worker.
d. 4th; output reaches is maximum.
e. 5th; the average product of labor is also declining.
