Question

1. Deciding how many workers to hire: Assume that the initial price of shoes in this example is $30 per pair. What is the marginal revenue product for each worker? Fill in the following chart and graph each function.

Number of workers	0	1	2	3	4	5	6	7
Total Output Of shoes	0	8	15	21	26	29	31	30
Marginal Output of shoes
Marginal Revenue Product (a.k.a. value of the marginal product of labor)

a. If it costs the firm $90 per worker per day, how many workers would be hired? Why? 

b. If the price of shoes was $20 instead of $30, how many workers would be hired? 

c. If labor costs went up to $120/day and the price of shoes was $30 each, how many workers would be hired? 

2.   Explain the labor-leisure tradeoff. Why would the labor supply be backward bending at a very high wage rate? 

3.  If the price of the final product goes up, how does that impact labor demand? Graph the impact of a higher price on a labor market graph where you have wage rate on the vertical axis and quantity of workers on the horizontal axis.

Answer 1