Question

"When a firm hires 10 units of labor, 20 pens are produced. When it hires another unit of labor, the total output increases to 23 pens. If the price of one pen is $2, the value of the marginal product of the eleventh unit of labor is ________."

Answer 1

$6.00

Step-by-step explanation:

Marginal product refers to the change in output and labour when an additional unit is added to both. In calculating marginal product (of labour), it is illustrated as ∆Q/∆L = Marginal product(of labour).

To calculate the ∆Q = New output less old output and to calculate the ∆L = New labour size less old labour size. Replacing words with figures, we have:

∆Q = 23 units - 20 units = 3 units while ∆L = 11(10 + 1) - 10 = 1.

Therefore, ∆Q/∆L = 3/1 = 3 units. Price of each pen is $2 so, 3 units × $2.00 = $6.00

Answer 2

$6

Step-by-step explanation:

Marginal product of labor can be defined as the change in output resulting from a change in labor inputs. It can be calculated using:

Marginal product of labor (MPL)=change in output/change in labor

Or

MPL= ∆Q/∆L

Given:

New output= 23 pens

Previous output=20 pens

New labor size= 10+1=11 unit of labor

Previous labor size=10 unit of labor

Change in output=New output - previous output

=23-20=3 pens

Change in labor=New labor size - previous labor size

=11-10= 1 unit of labor

Recall,

Marginal product of labor (MPL)=change in output/change in labor

Marginal Product of Labor=3/1

= 3 pens

If price of one pen is $2

Then,

The value of the marginal product of the eleventh unit of labor= 3 pens× $2

=$6