Question

6. (Table: Abracadabra Processors Ltd.) Number of Workers Number of Computer Chips Produced 3 900 4 1.250 5 1,550 1.800 2,000 8 | 2.150 9 2 ,250 (4 pts.) Refer to the figure. Knowing that each computer chip produced sells for $350: A) What is the marginal product of the 5th worker? B) Suppose that unions enter the industry, workers become unionized, and wages rise from $45,000 to $60,000 per year. How many workers will Abracadabra hire? C) The marginal product of labor generally increases/decreases) as more labor is hired. Why? D) Why will the firm hire the same amount of workers when the wage is between $35,000 to $45,000 per year, but not at $55,000 per year?

Answer 1

Workers	Number of computer chips	Marginal product	MRPL(MP*P)
3	900
4	1250	350	122500
5	1550	300	105000
6	1800	250	87500
7	2000	200	70000
8	2150	150	52500
9	2250	100	35000

A) MP of 5th worker = 300

B) Workers hired when wage = 60000 = 7

C) Marginal productivity decreases as more labor is hired because as the firm increases the labor to employ at the fixed resource, the efficiency of workers keeps decreasing

D) The firm only hires up to the point where MRPL of the worker is either equal to or greater than the wage,so When Wage = 35000-45000, the number of workers hired = 9 but when Wage = 55000, the workers hired = 7 as the MRPL of 8th and 9th worker is below the wage.