Question

2) Answer the following questions on the basis of the table shown below. as is type B labor, and VMPBx and VMPBy are the industry values of the marginal products of this type of labor in producing x and y, the only two goods in the economy. VMPBx $18 15 12 9 6 3 VMPBy $23 19 15 1 2 4 6 15 a. Explain why the VMPs in the table decline as more units of labor are employed If the supply price or opportunity cost of labor Pt is $9, how many units of type B labor need to be used in producing x and y to achieve an efficient allocation of labor? What will be the combined total value of the two outputs? Briefly explain your answer b. Suppose that Pt is $15 and the presently 5 units of labor are being allocated to producing x, while 2 units are being allocated to y. ls this an efficient allocation of labor? Why or why not? If not, what is C. the efficient allocation of type B labor? Briefly explain your answer.

Need help, please show work

Answer 1

Given that, the following question on the basis of the table Q_B is type B labor, and VMP_ax and VMP_bx are the industry values of the marginal products the VmP_s in the table decline VMP is the dollar value of the additional output a firm gets by employing one additional unit of labour. VMP declines an quantity of (2) labour rises due to the law of demines being marginal returns the supply price or opportunity cost of below 2n a competitive market P_L = VMP P_L = 9 = VMP_Bx when Q_B = 4 p_L = 9 = VMP_By when Q_B = 5 Therefore Total output = (4 times 9) + (5 times 9) = 81 suppose that P_L is $_15 and the present 5 unit VMP B_x = P_L and VMP By = P_y Therefore when, P_L = 15 Q_B = 2 (with x) Q_B = 3 (with y) Thus 5 unit for x while 2 to y is