Use the information given in the table below to answer the following question(s). Assume the firm hires labor competitively and sells its product in a competitive price-taker market at a price of $2 per unit.
Units of Labor
Total Output
1
6
2
11
3
15
4
18
5
20
6
21
a) What is the Marginal Revenue Product of the 5th unit of labor?
b) If the market wage is $5 per day, how many workers should the firm employ if it wants to maximize profits?
c) If the market wage rate rose to $7 per day, how many workers should the firm employ if it wants to maximize profits?
Use the information given in the table below to answer the following question(s). Assume the firm hires labor competitively and sells its product in a competitive price-taker market at a price of $2 per unit.
| Units of Labor | Total Output |
| 1 | 6 |
| 2 | 11 |
| 3 | 15 |
| 4 | 18 |
| 5 | 20 |
| 6 | 21 |
a) What is the Marginal Revenue Product of the 5th unit of labor?
b) If the market wage is $5 per day, how many workers should the firm employ if it wants to maximize profits?
c) If the market wage rate rose to $7 per day, how many workers should the firm employ if it wants to maximize profits?
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4. Standard Enterprises produces an output that it sells in a highly competitive market at a price of $100 per unit. Its inputs include two machines (which cost the firm $50 each) and workers, who can be hired on an as-needed basis in a labor market at a cost of $2,800 per worker. Based on the following production data, how many workers should the firm employ to maximize its profits?
| Machines | Workers | Output |
| 2 | 0 | 0 |
| 2 | 1 | 60 |
| 2 | 2 | 100 |
| 2 | 3 | 129 |
| 2 | 4 | 148 |
| 2 | 5 | 160 |
| 2 | 6 | 168 |
Assume that the firm only uses labor as a resource in production and is hiring workers in a purely competitive labor market. In other words, the firm can hire as many workers as it wishes without affecting the equilibrium wage rate.
|
Units of Labor (L) |
Total Product (Q) |
Product Price (P) |
Total Revenue (TR) |
Marginal Revenue Product (MRP) |
|
0 |
0 |
$2.20 |
$0 |
--- |
|
1 |
15 |
$2.00 |
$30 |
$30 |
|
2 |
28 |
$1.80 |
||
|
3 |
39 |
$1.60 |
||
|
4 |
48 |
$1.40 |
||
|
5 |
55 |
$1.20 |
||
|
6 |
60 |
$1.10 |
a. Is the firm selling its product in a purely competitive market or an imperfectly competitive market?
b. Fill out both the TR and MRP columns with the correct values.
c. Suppose the wage rate is $11.00 per worker. How many workers should be employed, in order to maximize profits?
d. If the firm hires the optimum number of workers, what is its total profit?
