Question

Complete the table. The price of output is $10.(1 point) Units of Total Product Marginal Product Marginal Revenue Labor from labor from Labor Product from Labor 0 10 20 2 80 150 120 90 80 | 40 10 20 11 5 How many workers should this firm hire if the price of labor cost is $400? Write the rule you used to determine the number of workers. (2 points) b. Why does marginal product eventually fall? (1 point) c. Illustrate and explain what would happen to the amount of labor the firm should hire if labor became more productive. (2 points)

Answer 1

We can complete the entire table using the given formulas:

Total product from labor TPL_n = Total product from labor TPL_n-1 + Marginal product from labor MPL_n

and Marginal revenue product from labor MRPL = MPL*P (where P is the price of output)

Thus, we can get the completed table as :

units of labor Total product from laboral from labor Marginal product Marginal revenue product from labor 10 100 200 30 TL yoo 1 70 800 4 on I 150 tl 1500 en voo is sw N - 300 150 1200 420 120 90 900 800 80 510 590 630 I 650 yo To 20 ooo 655

a) If price of labor cost is $400, firms must employ 3 units of labor (i.e, where MRPL = price of labor cost = $400).

b) The marginal product eventually falls owing to law of diminishing marginal returns.

c) If labor becomes more productive, the firm will hire higher number of labor as TPL and MPL both rises.