Question

Refer to Figure 18-1. Suppose the firm sells its output for $12 per unit and pays each worker $700 per week. What is the value of the marginal product of the fifth worker?

Answer 1

The value of the marginal product of the fifth worker is 540.

Marginal product refers to the additional output or production that is generated by adding one more unit of a specific input such as labor or capital while keeping other inputs constant.

MP = Change in Q

The value of marginal product of labor (VMP) = MP * Price

We will need to prepare a table showing MP and VMPL to know the VMPL of 3rd worker.

W Q MP VMPL

1 120 120 1440

2 210 90 1080

3 285 75 900

4 345 60 720

5 390 45 540

MP of 5rd worker = 390 - 345 / 3 - 2

= 45 / 1

= 75.

The firm sells its output for $12 per unit.

VMPL of 5rd worker:

= 45 * $12

= $540

Note: The graph showing the product level based on additional labour is attached below