Question

Suppose Die Cast Aluminum Co. is a subcontractor for the auto industry and makes specialized auto parts. There i s a bracket it manufactures that sells for $2.00. The following table shows the number of brackets that can be produced from a given number of labor hours. Assume the the company cannot hire labor for a fraction.

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 seventh hour of labor is ____ (integer)

The value of the marginal product of labor for the seventh hour is ____ (round to two decimal places)

If the wage paid to workers is $25/hour, it should employ ____ workers (integer)

If the wage paid to workers is $35/hour, it should employ ____ workers (integer)

If the wage is $25/hour, but the price of a bracket declines to $1.50, it should employ ____ workers (integer)

Answer 1

The marginal product of labor for the seventh hour of labor is the difference between the output at 6
hours of labor and 7 hours of labor = (157 - 155) = 2 units
The value of the marginal product of labor for the seventh hour is price x MPL = 2*2 = $4.
If the wage paid to workers is $25/hour, it should employ 4 workers.
This is because the 4th labor has a marginal product of 20 and its market value is 20*2 = 40. If 5th
worker is hired, its VMPL is 2*10 = 20 which is not sufficient to cover his wage at $25.
If the wage paid to workers is $35/hour, it should employ 4 workers (integer)
This is because the 4th labor has a marginal product of 20 and its market value is 20*2 = 40 which is
sufficient to cover his wage at $35.
If the wage is $25/hour, but the price of a bracket declines to $1.50, it should employ 4 workers
(integer)
This is because the 4th labor has a marginal product of 20 and its market value is 20*1.5 = 30. This is
sufficient to cover his wage at $25.