Question
In: Economics
The following table shows the total output per hour produced in a factory for various levels of employment of labor:
The following table shows the total output per hour produced in a factory for various levels of employment of labor:
Number of Workers | Total Output |
| 1 | 8 |
| 2 | 18 |
| 3 | 30 |
| 4 | 41 |
| 5 | 50 |
| 6 | 55 |
| 7 | 59 |
| 8 | 61 |
A) The firm sells each unit of output at $2, and each worker is paid a wage of $12.
After how many workers, does diminishing returns start to occur?
B)
The firm sells each unit of output at $2, and each worker is paid a wage of $12.
How many workers should the firm employ in order to maximize profit?
Solutions
Expert Solution
A) diminishing returns refer to decrease in marginal product of labor.
Diminishing returns begin after 3rd worker.
B) real wage = 12/2= 6
Profit is maximized by producing at a point where marginal product of labor is greater than or equal to real wage.
This condition is satisfied When L = 5 and MPL = 50-41= 9
The firm should hire 5 workers
Rahul Sunny answered 1 year agoRelated Solutions
Table 1 The following table shows output per hour produced by the different units of labor....
Table 1
The following table shows output per
hour produced by the different units of labor.
Table 1
Number of Workers
Output per Hour
Price of the Product
0
0
$3
1
7
$3
2
12
$3
3
15
$3
4
17
$3
5
18
$3
The marginal revenue product of a
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Price Level
Real Output Supplied (Billions of dollars)
(Billions of dollars)
(Index number)
(Billions of dollars)
5
90
70
10
60
65
20
30
50
40
20
40
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10
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40
1800
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2,400
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2,600
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3,000
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Tech 1
Tech 2
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K
L
K
L
K
L
1
6
1
4
4
2
7
2
7
3
6
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10
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20
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produced and L the amount of labor required to produce the
corresponding level of output. For example, to produce 2 units of
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Number of employees
Total Product
Marginal Product
Fixed Cost
Variable Cost
Total Cost
Marginal Cost
Average Cost
0
0
-
-
-
1
13
2
25
3
35
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Question 2
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0 0
1 350
2 800
3 1220
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19.
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c.
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d.
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