Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 29, Problem 2E
To determine
To compute:
The marginal revenue product.
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Use the graph to answer the question that follows.
Based on the chart above, if the product sells at a price of $10 per unit, what is the marginal revenue product of the seventh unit of labor?
0
$6.50
About $5
About $25
Indeterminate
Why would a profit-maximizing firm expand the use of each input until its marginal revenue product equals the price of the input?
The marginal product of an input in the production process is the increase in 1. profit obtained from an additional unit of that input. 2. total revenue obtained from an additional unit of that input. 3. total revenue obtained from an additional unit of that input. 4. quantity of output obtained from an additional unit of that input.
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- Widget factory Inc. in Wisconsin has the following production function: F(L,K)=2L L represents the number of labours hours. Workers at this factory are paid an hourly wage of $30 and they rent capital at$25/ hour.since this is a competitive market, the factory output is $50 per unit. Let's pretend the firm operates in the short run with capital fixed at 900, how many workers would widget factory Inc employ? What is their profit rate?arrow_forwardPlease answer ALL questions below: 1.The marginal revenue product givesa. the additional revenue obtained when an additional unit of a variable input is hired. b. the additions to total cost when an additional unit of a variable input is hired. c. the amount that other inputs must increase by when labor increase by one unit. d. the change in total product for an additional unit of a variable input. 2. When manufacturing an iPhone, parts must be soldered together. This work can be done by labor or by a robot (capital). More robots will be hired when the price of labor increases. This is known as a. the substitution effect. b. the complementary effect. c. marginal revenue product. d. the effect of changing labor productivity. 3. Which of the following is the largest union in the United States? a. American Federation of State, County, and Municipal Employees b. National Education Association c. International Brotherhood of Electrical Workers d. International Brotherhood of Teamsters 4.…arrow_forwardSuppose a certain firm is able to produce 125 units of output per day when 19 workers are hired. The firm is able to produce 137 units of output per day when 20 workers are hired, holding other inputs fixed. The marginal product of the 20th worker isarrow_forward
- What is the definition of Marginal Revenue Product? Give an examplearrow_forwardIn the short run, the owner of a firm should continue to hire additional units of labor until: a. the price of the product is equal to the wage rate divided by the marginal product of labor. b. the wage rate is equal to the price of the product multiplied by the marginal product of labor. c. the marginal product of labor is equal to the wage rate divided by the product price. d. Both a and c are correct. e. All of the above are correct.arrow_forwardTerry’s Lawn Service rents five small push mowers and two large riding mowers to cut the lawns of neighborhood households. The marginal product of a small push mower is 3 lawns per day, and the marginal product of a large riding mower is 6 lawns per day. The rental price of a small push mower is $10 per day, whereas the rental price of a large riding mower is $25 per day. Is Terry’s Lawn Service utilizing small push mowers and large riding mowers in a cost-minimizing manner?arrow_forward
- Suppose Die Cast Aluminum Co. is a subcontractor for the auto industry and makes specialized auto parts. There is a bracket it manufactures that it sells for $1.00. The following table shows the number of brackets that can be produced from a given number of labor hours. Assume that the company cannot hire labor for a fraction of an hour. Hours of Labor Output 0 0 1 50 2 90 3 120 4 140 5 150 6 155 7 157 The marginal product of labor for the third hour of labor is ...????. (Enter your response as an integer.) The value of the marginal product of labor for the third hour of labor is ......???. (Round your response to two decimal places.) If the wage paid to workers in Die Cast's plant is $25/hour, it should employ ......??? worker(s). (Enter your response as an integer.) If the wage paid to workers in Die Cast's plant is $35/hour, it should employ ......???? worker(s). (Enter your response as an integer.) If…arrow_forwardThe following table shows the production function for a company. This company sells its product in a perfectly competitive product market at a price of $4 each and hire labor in a perfectly competitive labor market at a wage of $450 per week. Calculate the Marginal MarginalProduct of the 1st, 2nd, and 3rd. Calculate the Value ofMarginal Product of the 1st, 2nd, and 3rd How many workers should it hire? How do you know? Explain your answer. Show formulas and some of your calculations.arrow_forwardConsider a fishery with the following production function where L is the number of fishermen and TP (total product) is the total number of fish caught among all fishermen. (And assume they are divided equally among the fishermen.) L 1 2 3 4 5 6 7 8 9 10 TP 18 34 48 60 70 78 84 88 90 90 The price of fish is $3 and the wage of a fisherman is $36. a. If the fishery is private property, how many fishermen will the owner hire? [1] b. If the fishery is common property, how many people will come to fish? [2] (Assume people fish as a job and not for recreation here.) c. What is the efficient number of fishermen? [3]arrow_forward
- Take a Cobb-Douglas production function, find its Elasticities w.r.t output and Elasticity of Substitution with the help of partial derivatives.arrow_forwardWhich of the following can reduce the marginal revenue product of labor? Select one: a. A reduction in the demand for firms– products. b. A reduction in workers– supply of labor to firms. c. A decrease in firms– demand for inputs that substitute for labor. d. An increase in the extra output firms gain from adding another unit of labor.arrow_forwardA manager hires labor and rents capital equipment in a very competitive market. Currently the wage rate is $12 per hour and capital is rented at $8 per hour. If the marginal product of labor is 60 units of output per hour and the marginal product of capital is 45 units of output per hour, is the firm using the cost-minimizing combination of labor and capital? If not, should the firm increase or decrease the amount of capital used in its production process?arrow_forward
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