Question

In the short run, a tool manufacturer has a fixed amount of capital. Labor is a variable input. The cost and output structure that the firm faces is depicted in the table below. Calculate the total labor cost and the marginal resource cost, and then complete the table. Instructions: Enter your answers as whole numbers. Quantity of Labor Total Product Hourly Wage Rate ($) Total Labor Cost ($) Marginal Resource (Labor) Cost ($) 10 400 9 11 418 12 12 434 15 13 448 18 14 460 21 15 470 24

Answer 1

Quantity of labor	Total product	Hourly wage rate ($)	Total labor cost ($)	Marginal resoruce (labor) cost ($)
10	400	9	90	-
11	418	12	132	42
12	434	15	180	48
13	448	18	234	54
14	460	21	294	60
15	470	24	360	66

Formulae:

Total labor cost = Quantity of labor * Hourly wage rate

Marginal resource (labor) cost of Nth worker = Total labor cost of N workers - Total labor cost of (N-1) workers

Sample calculation:

When Quantity of labor = 12 units, Hourly wage rate = $15

Total labor cost = Quantity of labor * Hourly wage rate = 12 * $15 = $180

Marginal resource cost of 12th unit of labor = Total labor cost of 12 workers - Total labor cost of 11 workers = $180 - $132 = $48