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

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

1.

Marginal product of third worker hired = 36-26

Marginal product of third worker hired = 10

Value of marginal product of third worker hired = 10*2

Value of marginal product of third worker hired = 20

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2.

Number of workers	No. of buckets of Haskap berries produced per hour	Marginal product per hour	Value of Marginal product per hour
1	14	14	28
2	26	12	24
3	36	10	20
4	44	8	16
5	50	6	12

To maximize the profit, Robert will hire 4 workers, because value of 4rth worker's marginal product is $16 per hour that is equal to his wage rate of $16 per hour . The all 4 workers will produce total of 44 buckets of haskap berries per hour.

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3.

If wage rate increases to $20 per hour, then Robert will hire 3 workers, because 3rd worker will produce marginal product whose value is $20 per hour and it become equals to the wage rate of $20 per hour.