Social Science Clinic => Economics => Macroeconomics => Topic started by: isam on Nov 23, 2022
Title: The table shows the number of workers (L) and the output of bouncy balls (Q) each week. The bouncy ...
Post by: isam on Nov 23, 2022
The table shows the number of workers (L) and the output of bouncy balls (Q) each week. The bouncy ball producer is a price taker in both the product and labor markets.
Number of Workers (L)
Output of Bouncy Balls (Q)
0
0
1
41
2
97
3
144
4
184
5
205
6
225
Assume the price of a bouncy ball is $7.25. If the equilibrium wage is $290, what is the additional profit earned from hiring the third worker? ◦ $340.75 ◦ $50.75 ◦ $754 ◦ $1044
Title: The table shows the number of workers (L) and the output of bouncy balls (Q) each week. The bouncy ...
Post by: kuttz on Nov 23, 2022
$50.75
The additional profit earned from the third worker is the revenue earned by that worker, value of marginal product (VMP), minus the cost of the worker, wage ($290). Additional profit from third worker = VMP - Wage VMP = MP of third worker*Price of product MP of third worker = Output of third worker - Output of second worker = 144 - 97 = 47 Therefore, VMP = MP of third worker*Price of product = 47*7.25 = $340.75 and Additional profit from third worker = VMP - Wage = 340.75 - 290 = $50.75.