Question

Labor Input Physical output 10 500 11 600 12 690 13 760 14 800 Refer to the above table, answer the following questions: A. If the price of the good produced is $7, what is the marginal revenue product (MRPL=11) of the 11th worker? B. Suppose the price of the good sold is $10 and the marginal factor cost of labor(MFC) is $700, how many units of labor will the firm hire?

Answer 1

Step-by-step explanation:

Labor Input Physical output

10 500

11 600

12 690

13 760

14 800

marginal output of 11 th labor = 600 - 500 = 100

price of each product = 7

marginal revenue product of 11 th labor 7 x 100 = 700

B )

price of each of the goods sold = 10

marginal factor cost of labour = 700

minimum no of goods to be sold to cover the labour cost

= 700 / 10 = 70

no of goods added due to addition of 11 the labour = 100

no of goods added due to addition of 12 the labour = 90

no of goods added due to addition of 13 the labour = 70

so no of units of labor upto which the firm will continue to hire

= 13 .