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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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Chapter
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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Suppose that labor is the only input used by a perfectly competitive firm. The firm’s production function is as follows:

Days of Labor Units of Output
0 days 0 units
1 7
2 13
3 19
4 25
5 28
6 29
7 29

a. Calculate the marginal product for each additional worker.

b. Each unit of output sells for $10. Calculate the value of the marginal product of each worker.

c. Compute the demand schedule showing the number of workers hired for all wages from zero to $100 a day.

d. Graph the firm’s demand curve.

e. What happens to this demand curve if the price of output rises from $10 to $12 per unit?

Subpart (a):

To determine
Calculate marginal product of labor.

Explanation

Marginal Product of Labor (MPL) is the changes in total output that result from employing an additional unit of labor in the production process. In other words, it is the changes in output per unit change in labor. It can be expressed as follows:

MPL=Out putpresentOut putpreviousLaborpresentLaborprevious

Subpart (b):

To determine
Calculate value of marginal product of labor.

Subpart (c):

To determine
Demand and equilibrium price of an apple.

Subpart (d):

To determine
Demand and equilibrium price of an apple.

Subpart (e):

To determine
Demand and equilibrium price of an apple.

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