Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 18, Problem 3CQQ
To determine
The competitive firm hiring labor.
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Students have asked these similar questions
Kelsey owns a cotton candy shop that employs 7 people. The employees are paid $12 per hour, and a cotton candy sells for $3. If Kelsey is maximizing her profit (and operating in a perfectly competitive output and perfectly competitive labor market), what is the value of the marginal product of labor of the last worker she hired? What is this worker’s marginal product of labor?
A firm produces good Y with just 2 factors: Capital which is fixed in supply and labour which is variable. Identify the stages of production in the diagram and explain why the firm still hire labour even though it is in the range of diminishing returns.
What is the number of workers after which diminishing marginal returns starts? Is this a short run or long run phenomenon?
Labour (units)
1
2
3
4
5
6
7
8
9
Total Product (TP) in Units
8
15
24
30
35
37
38
38
36
Average Product (AP) in units
8
7.5
8
7.5
7
6.17
5.43
4.75
4
Marginal Product
(MP) in units
8
7
9
6
5
2
1
0
-2
Assume the labor and kapital are purchase in a perfectly competitive market and the final product is sold in a perfectly competitive market.
LABOR P= $4 KAPITAL P=$6
________________________________________________________________________________________________
resource total prod marg prod total rev MRP resource total prod marg prod total rev MRP
LABOR KAPITAL
0 0 0 0
1 16 $32 1 24 $48
2 28 $56 2 41…
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- You are given the following schedule for the production of pens by a firm Labor Total Product 0 0 1 20 2 50 3 70 4 80 5 85 6 82 If pen sells for Rs 3 per unit and workers can be hired in a competitive labor market for Rs30 per day, how many workers should be hired? Explain your answers clearly.arrow_forwardA. Explain, with the aid of a graph, the equilibrium position of a firm operating in a perfectly competitive labour market.(Note: do the graph and the explanation) B. The market demand for labour is the sum of all the individual firms’ demand curves.Identify four factors that can cause the market demand curve to shift. C. Why are labour markets imperfect? Give five reasonsarrow_forwardtrue or false The marginal revenue product of labor is the extra revenue associated with the last unit of output.arrow_forward
- Your enterprising uncle opens a sandwich shop that employs 11 people. The employees are paid $15 per hour, and a sandwich sells for $3. If your uncle is maximizing his profit, the value of the marginal product of the last worker he hired is , and that worker's marginal product is sandwiches per hour.arrow_forwardIn part 2, part b, you solved the question with supply of labor. We haven't seen that issue.we know - profit in the short run PQ-wLlong-term profit-PQ-wL-rKarrow_forwardTrue or false explain this a) In a competitive labor market, the price of labor is determined by the industry that hires the labor. b) In a competitive labor market if the wage is $10.00 than the MRC of labor is $10.00. c) labor and capital can never be substituted for each other. Explain it earlyarrow_forward
- Omega Custom Cabinets produces and sells custom bathroom vanities. The firm has determined that if it hires 10 workers, it can produce 20 vanities per week. If it hires 11 workers, a can produce 22 vanities per week. It sells each vanity for $800, and it pays each of its workers $1,000 per week Which of the following it correct? 1) For the 11 th worker, the marginal profit is $600. 2) For the 11 th worker, the marginal revenue product is $2,000. 3) The firm is maximizing its profit. 4)If the firm is employing 11 workers, then its profit would increase if it cut back to 10 workersarrow_forwardA firm hires labor in a perfectly competitive labor market. Its current profit-maximizing hourly output is 100 units, which the firm sells at a price of $5 per unit. The Marginal Physical product (MPP) of the last unit of labor employed is 5 units per hour. The firm pays each worker an hourly wage of $15. a)What Marginal Revenue (MR) does the firm earn from sale of the output produced by the last worker employed? b)Does this firm sell its output in a perfectly competitive market?arrow_forward2.back to Barry's ice making plant described in problem 1, the price of party ice falls to 25¢ a bag but bagger's wages remain at $10.00 an hour. a. What happens to Barry's marginal product? b. What happens to his value of marginal product? c. What happens to his demand for labour curve? d. What happens to the number of baggers that he employs? 3. Back at Barry's party ice shop described in problem, 1, bagger's wages increase to $20 an hour, but the price of ice remains at 50¢ a bag. a. What happens to his value of marginal product? b. What happens to Barry/s demand for labour curve? c. How many baggers does Barry employ? 4. What is discounting? What is present value? How do the two relate?arrow_forward
- Q3) True or false explain this a) In a competitive labor market, the price of labor is determined by the industry that hires the labor.b) In a competitive labor market if the wage is $10.00 than the MRC of labor is $10.00.c) labor and capital can never be substituted for each other. Explain it correctlyarrow_forwardAfter which administrative assistant do diminishing marginal returns begin for Jose's Tax Office? Explain using numbers. (b) Assume Jose's Tax Office sells its tax advisory services in a perfectly competitive market at a unit price of $4. Calculate the marginal revenue product of the fifth administrative assistant. Show your work. (c) Jose's Tax Office hires administrative assistants in a perfectly competitive labor market for administrative assistants at a wage rate of $90 per hour, and the market price of services remains $4. How many administrative assistants will Jose's Tax Office hire to maximize its profit? Explain using marginal analysis (d) Assume administrative assistants and office software are substitutes in providing tax advisory services by all tax firms in the market. If office software, a fixed input, becomes more expensive and Jose's Tax Office provides the same quantity of tax advisory services, will each of the following increase, decrease, or stay the same? (i) The…arrow_forward1. Explain how a firm’s production function is related to its marginal product of labor, how a firm’s marginal product of labor is related to the value of its marginal product, and how a firm’s value of marginal product is related to its demand for labor. 2. Give two examples of events that could shift the demand for labor, and explain why they do so.arrow_forward
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