The table below shows the marginal product of labor at various employment levels. Assume this firm...
The table below shows the marginal product of labor at various employment levels. Assume this firm is part of a perfectly competitive market and that the market price for the good is $10.
|
Labor |
Marginal Product of Labor |
|
1 |
10 |
|
2 |
8 |
|
3 |
7 |
|
4 |
5 |
|
5 |
3 |
|
6 |
1 |
- What is the value of the marginal product of labor at each level of labor?
- If the firm operates in a perfectly competitive labor market where the going market wage is $10, what is the firms profit maximizing level of employment?
Homework Answers
a.
|
Labor |
Marginal Product of Labor |
Marginal level Product of Labor = Marginal Product of labor*Price of a product |
|
1 |
10 |
100 |
|
2 |
8 |
80 |
|
3 |
7 |
70 |
|
4 |
5 |
50 |
|
5 |
3 |
30 |
|
6 |
1 |
10 |
b. The profit maximizing level of output is where wage rate equals Marginal level Product of Labor and is at Labor = 6
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