How many workers will the firm hire if the market wage rate is $28.75?

Complete the following labor demand table for a firm that is hiring labor competitively and selling its product in a competitive market.

Units of labor	Total product	Marginal product	Product price	Total revenue	Marginal revenue product


0 1 2 3 4 5 6	0 21 38 53 64 71 75		$3.75 3.75 3.75 3.75 3.75 3.75 3.75

Complete the table above and Answer the following Question:

How many workers will the firm hire if the market wage rate is $28.75? Explain why the firm will not hire a larger or smaller number of units of labor at each of these wage rates.

Solutions

Expert Solution

L	TP	MP	Price	TR	MRP
0	0		3.75
1	21	21	3.75	78.75	78.75
2	38	17	3.75	142.5	63.75
3	53	15	3.75	198.75	56.25
4	64	11	3.75	240	41.25
5	71	7	3.75	266.25	26.25
6	75	4	3.75	281.25	15

MP (nth unit) = TP (n units) - TP ((n - 1) units)

TR = P x TP

MRP = P x MP

Wage rate = $ 28.75

Workers hired = 4 (4th worker yields MRP > wage i.e. marginal revenue by addition of 4th worker > wage rate, workers are added to a point where MRP >= wage rate so as to maximize profit)

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

A firm that wants to employ workers should a. hire workers as long as the wage...

A firm that wants to employ workers should a. hire workers as long as the wage is less than the value of the marginal product. b. not hire workers if the value of the marginal product is less than the wage. c. hire workers as long as the wage is lower than the marginal profit of the last or previously hired worker. d. hire workers as long as the wage is greater than the value of the marginal product.

1. If the monopsony firm is a single-wage firm, then to hire more workers, the firm...

1. If the monopsony firm is a single-wage firm, then to hire more workers, the firm _____. a. must reduce wages b. must pay the new workers more c. must raise the wages of all workers d. will not change any wage 2. The local tennis stadium has a fixed number of seats for spectators. The equilibrium price to attend games for the Men's Championship is $15 and for Women's Championship is $25. Which of the following is true? a....

Suppose the wage increases. Show that in the long run the firm will hire fewer workers....

Suppose the wage increases. Show that in the long run the firm will hire fewer workers. Decompose the employment change into substitution effect and scale effects.

how do firms decide how to hire workers at different wage rates?

A monopsony hire one worker at a wage of $6, two workers at a wage of...

A monopsony hire one worker at a wage of $6, two workers at a wage of $7 each, (by adding one worker each will cause a one dollar increase to the wage). If the marginal revenue product for all workers is $17, asking how much will the wage to pay?

In the labor market the wage rate requested by workers will generally depend on workers’ expected...

In the labor market the wage rate requested by workers will generally depend on workers’ expected price Pe which is to prevail in the future, the current unemployment rate u, and a variable z that represents the unemployment benefits package. This defines the wage-setting relationship: W = PeF(u,z). At the same time, firms define the price-setting relationship: P = (1+m)W, where m is the markup of goods prices over wage rate. (1) Suppose we know the functional form F(u,z) =...

Draw the labor market for workers with a minimum wage above the market rate. Label on...

Draw the labor market for workers with a minimum wage above the market rate. Label on your graph the minimum wage, quantity demanded, quantity supplied, and the price set by the market. Is there a shortage or surplus of workers? How do you know? Show on your graph. Show the area of consumer surplus. Show the area of producer surplus. Show the area of the DWL. Show the area of the potential loss from job search.

The number of workers hired by a firm at a particular wage rate can be calculated...

The number of workers hired by a firm at a particular wage rate can be calculated if you know which of the following? a. c and d. b. Product supply curve. c. Marginal product of labor. d. Marginal factor cost. e. Marginal revenue product of labor.

1. In the decision of how many workers to hire, economic models assume firms are trying...

1. In the decision of how many workers to hire, economic models assume firms are trying to… Select one: a. Do what is best for their community b. Maximize the number of jobs they can create c. Minimize the number of workers and maximize the amount of capital d. Maximize their profits 2. An example of a public good would be: Select one: a. Automobiles b. Housing c. Military protection d. College 3. An externality occurs when: Select one: a....

Dear Economic Analyst, I need your expertise in determining how many workers to hire and how...

Dear Economic Analyst, I need your expertise in determining how many workers to hire and how much feed to purchase. The current price of labor is $60 per day, and feed costs $75 per ton. Below is my marginal physical product of both labor and feed. First, my current budget is unknown. Can you tell me the order in which I should purchase labor and feed? This order will provide priority when deciding on my level of inputs. Secondly, although...

Subjects