Define the marginal product of labor

Assignment Help Microeconomics
Reference no: EM13961408

The production technology of a firm is given in the table below. 

Number  of workers

Units of output

MPN

0

      0

-

1

    48

48

2

    88

40

3

  119

31

4

  144

25

5

  166

22

6

  184

18

7

  196

12

 

a.Define the marginal product of labor and explain how it relates to the production function (with N on horizontal axis and Y on vertical axis). What shape does a production function typically take and why? 

The marginal product of labor is the change in output (Y) in relation to a change in labor (N).  It can be numerically defined as ΔY/ΔN.  The production function typically shows a positive relation (line with positive slope) between number of workers and units of output; an increase in the number of workers will result in an increase in output.  The curve is upward sloping because the change in output in relation to the change in labor increases at a decreasing rate.  

b. Fill in the MPN column. Does this production function have the typical shape that you identified above. Why or why not? 

The production function does have the upward sloping shape that I identified above, as the number of workers increases, so does the units of output, but at a decreasing rate. 

c. Assume that the price of a unit of output is $10 and the nominal wage that you pay is $210. Calculate the number of workers that you will hire and the associated profit in REAL terms (as we did in class, we 'assume away' all other costs of production). 

Number  of workers

Units of output

MPN

MRPN

Marginal Profit

Total Profit

0

      0

-

-

-

-

1

    48

48

480

270

270

2

    88

40

400

190

460

3

  119

31

310

100

560

4

  144

25

250

40

600

5

  166

22

220

10

610

6

  184

18

180

-30

580

7

  196

12

120

-90

490

 

 

 

 

 

 

You will hire 5 workers. 

 d. Suppose that you are producing a commodity that you sell to China and given the slowdown in China's economy, the price of your product falls to $7. Explain how and why you would change your behavior. Please provide the intuition beginning your answer with... at the same level of labor input I am no longer .........  (please be as specific as possible). 

Number  of workers

Units of output

MPN

MRPN

Marginal Profit

Total Profit

0

      0

-

-

-

-

1

    48

48

336

126

126

2

    88

40

280

70

196

3

  119

31

217

7

203

4

  144

25

175

-35

168

5

  166

22

154

-56

112

6

  184

18

126

-84

28

7

  196

12

84

-126

-98

 

 

 

 

 

 

At the same level of labor input I am no longer maximizing profit because the real wage is not equal to the MPN.  MPN is equal to W/P, and with the price of the product falling from $10 to $7, the real wage is greater than the marginal revenue product of labor.  Because the additional revenue that is generated by each additional worker is less than the real wage, the firm will hire less workers.  

e. Calculate the new level of profits in REAL terms given the fall in price

f. Suppose that you have debt and that the payment is $200 per period. Calculate the percent of profits that $ 200 represents given the conditions in part c. and then calculate the percent of profits that $200 represents given the conditions in d. 

Conditions in Part C with debt:

Total profit = $610

Percent of debt = (200/610) x 100 = 33% 

Conditions in Part D with debt:

Total profit = $287

Percent of debt = (200/203) x 100 = 99% 

g. Suppose that profits and stock prices together as they usually do and that you own stock in this company.  If you had a crystal and predicted the slowdown in China, would you sell stock before China slows down or would you hold on and sell the stock after China slows down? 

h. Let’s return the initial conditions where the nominal wage rate = $210 and the price of a unit of output = $10. Assume that a new technology increases the number of units of output that each worker can produce by 5 units of output (i.e., each worker's MPN rises by 5).  Given this development. fill in table below.  

Number  of workers

Units of output

MPN

0

      0

-

1

53

53

2

98

45

3

134

36

4

164

30

5

191

27

6

214

23

7

231

17

 

i. (10 points)  Given that the workers are more productive, they demand a pay increase and you give it to them. The wage that is agreed upon is $220.  Calculate the following: Assume P = 10 as in part c) 

Employment: Before and after the changes in parts h. and i. 

Output: Before and after the changes in parts h. and i. 

Real Profits (in terms of output) : Before and after the changes in parts h. and i. 

Real Wages: Before and after the changes in parts h. and i. 

What are the implications of this change in conditions on the government budget? 

*****Did I calculate real profits and wages and what are the implications?

Before the changes in h and i: 

Number  of workers

Units of output

MPN

MRPN

Marginal Profit

Total Profit

0

      0

-

-

-

-

1

    48

48

480

270

270

2

    88

40

400

190

460

3

  119

31

310

100

560

4

  144

25

250

40

600

5

  166

22

220

10

610

6

  184

18

180

-30

580

7

  196

12

120

-90

490

 

 

 

 

 

 

After the changes in h and i: 

Number  of workers

Units of output

MPN

MRPM

Marginal Profit

Total Profit

0

      0

-

-

-

 

1

53

53

530

310

310

2

98

45

450

230

540

3

134

36

360

140

680

4

164

30

300

80

760

5

191

27

270

50

810

6

214

23

230

10

820

7

231

17

170

-50

770

Reference no: EM13961408

Questions Cloud

Mathematical description by the wave equation : A finite of length L that is fixed at both ends and is release from rest with an initial displacement will have the following mathematical description by the wave equation:
Consider the capacitor formed by a conducting sphere : Calculate the potential of the outer shell when charge Q is put on it and the inner shell is grounded.
Troubled product development project : A senior executive in a fast-paced, high-technology company is faced with making a decision on whether to terminate a troubled product development project. He knows from information received through the company's variance reporting procedure that the..
What is average force his arm is feeling firing mini-gun : Suppose Arnold holds the gun one foot (.300 meters) from his axis of rotation, firing perpendicular to said axis. His mini-gun shoots Russian 7.62x39 (8.11 grams, 671m/s) at cyclic rate of 3000 rounds per minute. What is the average force his arm ..
Define the marginal product of labor : Define the marginal product of labor and explain how it relates to the production function (with N on horizontal axis and Y on vertical axis). What shape does a production function typically take and why?
What should it have done differently : Was it ethical to manufacture and sell DDT to other countries after the Environmental Protection Agency (EPA) banned its use in the United States due to its harmful effects?
Mental physical and behavioral characteristics of client : Based on the review of the Jane Roberts case study, in 1-3 paragraphs use professional terminology to describe the mental, physical, and behavioral characteristics of the client
Discuss how transportation affects the supply chain : Define branding and discuss its importance to a new business. Discuss ways that a business can “block” competition from entering the playing field. Discuss how transportation affects the supply chain.
Write down the expression for the electric field : Write down the expression for the electric potential at the center of the circle produced by all of the point charges.

Reviews

Write a Review

Microeconomics Questions & Answers

  The free rider problem

Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.

  Failure of the super committee is good thing for economy

Some commentators have argued that the failure of the “Super committee” is good thing for the economy?  Do you agree?

  Case study analysis about optimum resource allocation

Case study analysis about optimum resource allocation: -  Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..

  Fixed cost and vairiable cost

Questions:  :   Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month?  Explain your choice.

  Problem - total cost, average cost, marginal cost

Problem - Total Cost, Average Cost, Marginal Cost: -  Complete the following table of costs for a firm.  (Note: enter the figures in the  MC   column  between  outputs of  0 and 1, 1 and 2, 2 and 3, etc.)

  Oligopoly and demand curve problem

Problem based on Oligopoly and demand curve,  Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another?

  Impact of external costs on resource allocation

Explain the impact of external costs and external benefits on resource allocation;  Why are public goods not produced in sufficient quantities by private markets?  Which of the following are examples of public goods (or services)? Delete the incorrec..

  Shifts in demand and movements along the demand curve

Describe the differences between shifts in demand and movements along the demand curve. What are the main factors which can shift the demand curve? Explain why they cause the demand curve to shift. Use examples and draw graphs to support your discuss..

  Article review question

Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:

  Long-term growth, international trade & globalization

Long-term Growth, International Trade & Globalization:- This question deals with concepts such as long-term growth, international trade and globalization. Questions related to trade deficit, trade surplus, gains from trade, an international trade sce..

  European monetary union (emu) in crisis

"Does the economic bailout of Spain and Greece spell the beginning of the end for the European Monetary Union (EMU)?"

  Development game “settlers of catan”

Read the rules of the game, the overview and the almanac for the Development Game "Settlers of Catan"

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd