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11-30    The table below shows a competitive firm's short-run production function. Labor is the firm's only...

11-30    The table below shows a competitive firm's short-run production function. Labor is the firm's only variable input, and market price for the firm's product is $2 per unit.

Units of Labor

Units of Output

3

370

4

490

5

570

6

600

7

620

If market price for the firm's product increases to $5, how many units of labor will the firm employ at a wage rate of $200?

a.         0, the firm shuts down

b.         4

c.         5

d.         6

e.         7

business   economics   
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Answer #1
Units of Labor Units of Output MPL MRP
3 370
4 490 120 600
5 570 80 400
6 600 30 150
7 620 20 100

the MRPL is at least greater than wage rate at L=5 units of workers and Q = 570 units.

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