Question

Suppose that a monopoly firm finds that its MR is $50 for the first unit sold each day, $49 for the second unit sold each day, $48 for the third unit sold each day, and so on. Further suppose that the first worker hired produces 5 units per day, the second 4 units per day, the third 3 units per day, and so on.

a. What is the firm’s MRP for each of the first five workers?
Worker MRP Unregulated
1 ----------------
2 ----------------
3 ----------------
4 ----------------
5 ----------------

Answer 1

$240

$174

$120

$75

$36

Explanation:

MRP = Change in revenue/Change in Labour

1. The first worker;

From the question, the first worker has 5 units

So, his change in revenue is 50+49+48+47+46 for the 5 units

Change in Revenue = $240

Since the worker remains the same and available all through,the change in Labour = 1 worker

MRP = $240/1

MRP = $240

2.The second worker;

The second worker has 4 units(starting from where the first worker stopped)

So, his change in revenue is 45+44+43+42 for the 4 units

Change in Revenue = $174

Since the worker remains the same and available all through,the change in Labour = 1 worker

MRP = $174/1

MRP = $174

3.The third worker;

The third worker has 3 units(starting from where the second worker stopped)

So, his change in revenue is 41+40+39 for the 3 units

Change in Revenue = $120

Since the worker remains the same and available all through,the change in Labour = 1 worker

MRP = $120/1

MRP = $120

4.The fourth worker;

The second worker has 2 units(starting from where the third worker stopped)

So, his change in revenue is 38+37 for the 2 units

Change in Revenue = $75

Since the worker remains the same and available all through,the change in Labour = 1 worker

MRP = $75/1

MRP = $75

5.The fifth worker;

The second worker has 1 units(starting from where the fourth worker stopped)

So, his change in revenue is 36 for the 1 unit

Change in Revenue = $36

Since the worker remains the same and available all through,the change in Labour = 1 worker

MRP = $36/1

MRP = $36