The marginal revenue product per unit of labor.
Explanation of Solution
Option (a):
First person can produce 5 units. The price of the first unit is $50 which is decreased by $1 for each successive unit sold in the market. The marginal revenue product of the first worker can be calculated by using the equation as follows:
The marginal revenue of the first labor is $240.
The marginal revenue product of the second worker can be calculated by using the equation as follows:
The marginal revenue of the second labor is $174 .
The marginal revenue product of the third worker can be calculated by using the equation as follows:
The marginal revenue of the third labor is $120.
The marginal revenue product of the fourth worker can be calculated by using the equation as follows:
The Marginal revenue product of the fourth labor is $75.
The marginal revenue product of the fifth worker can be calculated by using the equation as follows:
Therefore, the marginal revenue of the fifth worker is $36.
Option (b):
The marginal revenue product of the regulated
The marginal product of the first labor can be calculated by using the equation as follows:
Therefore, the marginal revenue product of the first labor is $200.
The marginal product of the 2nd labor can be calculated by using the equation as follows:
Therefore, the marginal revenue product of the second labor is $160.
The marginal product of the 3rd labor can be calculated by using the equation as follows:
Therefore, the marginal revenue product of the 3rd labor is $120.
The marginal product of the 4th labor can be calculated by using the equation as follows:
Therefore, the marginal revenue product of the 4th labor is $80.
The marginal product of the 5th labor can be calculated by using the equation as follows:
Therefore, the marginal revenue product of the 5th labor is $40.
Option (c):
The profit maximizing firm would employ the labor at the point where the marginal revenue product is greater or equal to marginal resource cost.
When the wage level is $170, the unregulated firm would employ 2 units of labor; because, the marginal revenue product exceeds the marginal resource cost (wage) at 2 units of labor.
In the regulated market, the marginal revenue product exceeds 1 unit of labor. So, the firm would employ only one unit of labor. Thus, the unregulated firm would employ more than the regulated firm.
Option (d):
When the wage level is $77, the unregulated firm would employ 3 units of labor; because, the marginal revenue product exceeds the marginal resource cost (wage) at 3 units of labor.
In the regulated market, the marginal revenue product exceeds 4 unit of labor. So, the firm would employ 4 units of labor. Thus, the regulated firm would employ more than the unregulated firm.
Option (e):
The change in the demand for labor in the regulated and unregulated market changes due to the change in the resource price (Wage). Thus, the regulating monopoly output price does not increase its demand for resource.
Concept introduction:
Marginal revenue product: The marginal revenue product is the additional revenue earned by the firm by using one more input to produce an additional output.
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Chapter 16 Solutions
MICROECONOMICS (LL) W/CONNECT ACCESS
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