The following table is a record of the data of a competitive firm on labour and output:

Unit of labour Total product MPL VMPL

0 0

1 10

2 22

3 32

4 39

5 42

6 41

Suppose the product price is $5 and the market wage per unit of labour is $35.

a) Reproduce the above table on your answer sheet and complete the table. (6 marks)

b) How many units of labour should be employed to maximise profit? Briefly explain your answer. (8 marks)

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Patrina SchowalterLv2

1 Apr 2019

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Question 1

The following table is a record of the data of a competitive firm on labour and output:

Unit of labour	Total product	Marginal product of labour (MPL)	Value of marginal product of labour (VMPL)
0	0
1	10
2	22
3	32
4	39
5	42
6	41

Suppose the product price is $5 and the market wage per unit of labour is $35.

a Reproduce the above table on your answer sheet and complete the table.

b How many units of labour should be employed to maximise profit? Briefly explain your answer.

3. Firm Y uses labor and capital in production and the current time-period is too short for it to change the amount of equipment and work-space. However, it can change the level of its output by changing the amount of labor it uses, as shown here:

Labour 0 1 2 3 4 5 6

Output 0 12 22 30 36 40 42

A. Derive the marginal revenue product schedule given that the firm can sell each unit it produces for $10. (I.e., calculate the MRPL at each level of employment.)

B. Given that the price of each unit of output is $40 and each worker hired must be paid $40, what is the optimal level of employment of labour?

pinkbat881

Refer to the table below and answer questions A through D.

Labour Output per hour

0 0

1 6

2 11

3 15

4 18

5 19

A. What is the marginal product of labor as the firm moves from using two workers to using three workers?

B. What is the marginal product of labor as the firm moves from using four workers to using five workers?

C. Suppose the price of output is $4 per unit. What is the value of the marginal product of labor as the firm moves from using three workers to using four workers?

D. If this profit-maximizing firm sells its output in a competitive market for $4 per unit and hires labor in a competitive market for $7/hour, then how many workers should this firm hire?