Question

Robert hires workers to pack the Haskap berries he is growing. The market for Haskap berries is perfectly competitive, and the price of Haskap berries is $2 per bucket. The labour market is competitive, and the market wage rate is $16/hour. Table 1.0 below shows the workers’ total product schedule # of workers # buckets of Haskap berries produced per hour 1 14 2 26 3 36 4 44 5 50 Table 1.0 Answer the following: 1. What is the marginal product of the third worker hired, and what is that worker’s Value of Marginal Product? 2. How many workers will Robert hire to maximize profit and what will the workers produce? 3. If the market wage rate rises to $20/hour, how many workers will Robert hire?

Answer 1

Marginal product is the addition to the total product when one more worker is hired.

Value of marginal product is the marginal product multiplied by the price of the product.

Following table shows the marginal product schedule and value of marginal product schedule -

Number of workers	Buckets of Haspak berries produced per hour (Total Product)	Marginal Product	Value of marginal product
1	14	14	28
2	26	12	24
3	36	10	20
4	44	8	16
5	50	6	12

Question 1

The marginal product of third worker hired is 10 buckets of Haspak berries per hour.

The value of marginal product of third worker is $20.

Question 2

In order to maximize profit, Robert will hire that number of workers corresponding to which wage rate equals the value of marginal product.

The wage rate is $16 per hour.

The wage rate equal the value of marginal product corresponding to hiring of 4 workers.

So,

Robert will hire 4 workers to maximize profit.

The workers will produce 44 buckets of Haspak berries per hour.

Question 3

In order to maximize profit, Robert will hire that number of workers corresponding to which wage rate equals the value of marginal product.

The wage rate is now $20 per hour.

The wage rate equal the value of marginal product corresponding to hiring of 3 workers.

So,

Robert will hire 3 workers to maximize profit.