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Labor Demand Analysis for Table Factory

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42 views2 pages

Labor Demand Analysis for Table Factory

Uploaded by

hhhh40502
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

II Short Answer Questions

1. Labor Demand
Suppose that you own a table factory, and you are a perfect competitor in
the output market and the labor market. The relationship between the tables
produced and the number of workers you hire is as follows:

Table 1: Production function of the Table Factory

Labor Total Product Produced MPL


0 0 -
1 12
2 25
3 35
4 42
5 46
6 49

(a) Calculate the Marginal Product of Labor for each level of labor.
(b) If the price of output is $8, what is the value of marginal product
(VMPL) of labor for the third worker?
(c) Following (b), suppose the wage rate is $27, how many workers should
you hire?
(d) If the price of output falls to $5 and the wage remains $27, how many
workers should you hire?

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