Question

2. Assume work is the only input of a perfectly competitive firm. The production function of the firm is as follows: (* Use only whole numbers in your answers) A. Calculate the marginal product of each additional employee

B. Each unit of product sells for $ 10. Calculate the marginal value of each employee's product

C. Complete the demand itinerary showing the number of employees hired for wages considering that the unit price is $ 10 and the price is $ 12.

Employees	Units produced	Marginal product	Marginal product value
0	0	0	0
1	11
2	19
3	25
4	28
5	29
6	30
7	31

Salary	Demand at $10	Demand at $12
$8
20
35
50
65
75
100

Answer 1

A) and B)

Employees	Units Produced	MP	MP value
0	0
1	11	11	110
2	19	8	80
3	25	6	60
4	28	3	30
5	29	1	10
6	30	1	10
7	31	1	10

MP (nth unit) = Units produced (n units) - Units produced ((n-1) units)

MP value = Price x MP

C)

Salary	Demand at $ 10	Demand at $ 12
8	7	7
20	4	4
35	3	4
50	3	3
65	2	3
75	2	2
100	1	1

Employees would be hired if MP value > salary.

e.g. when salary = 65:

P = 10: 2 employees would be hired as MP value (2nd employee) > 65

(but it is not so for the third employee)