This topic contains a solution. Click here to go to the answer

Author Question: A firm producing bottled water reports the following production information: of Workers Total ... (Read 37 times)

tsand2

  • Hero Member
  • *****
  • Posts: 520
A firm producing bottled water reports the following production information:
 
   of Workers Total Product
  (gallons of water per hour)
  0 0
  10 1750
  20 2750
  30 3550
  40 4150
  50 4550
  60 4750
 
  The bottled water sells in a competitive market at a price of 10 cents per gallon. The firm hires workers in a competitive labor market at a wage of 7 per hour. The firm is currently hiring 20 workers and is considering hiring another 10 . What would you recommend the firm do? Why?

Question 2

A firm producing compact discs reports the following production information:
 
   of Workers Total Product
  (boxes of CDs per hour)
  0 0
  1 125
  2 225
  3 305
  4 365
  5 405
  6 425
 
  The compact discs sell in a competitive market at a price of 0.20 per box. The firm hires workers in a competitive labor market at a wage of 12 per hour. The firm is currently hiring four workers and is considering hiring a fifth worker. What would you recommend the firm do? Why?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

Yixagurpuldink

  • Sr. Member
  • ****
  • Posts: 341
Answer to Question 1

I would suggest that the firm hire the third worker. The marginal productivity of the extra ten workers is 800 gallons of water per hour. This translates into 80.00 of MRP (800 x 10 cents). Since the firm is paying 7 per worker the marginal cost of hiring the ten additional workers if 70.00 . This makes it profitable for the firm to hire them.

Answer to Question 2

I would suggest that the firm not hire the fifth worker because his marginal revenue product will be 8 (40  0.20) and this is less than the market wage rate. Therefore, the firm would lower its profits if it hired the fifth worker.





 

Did you know?

Chronic necrotizing aspergillosis has a slowly progressive process that, unlike invasive aspergillosis, does not spread to other organ systems or the blood vessels. It most often affects middle-aged and elderly individuals, spreading to surrounding tissue in the lungs. The disease often does not respond to conventionally successful treatments, and requires individualized therapies in order to keep it from becoming life-threatening.

Did you know?

A seasonal flu vaccine is the best way to reduce the chances you will get seasonal influenza and spread it to others.

Did you know?

Vaccines cause herd immunity. If the majority of people in a community have been vaccinated against a disease, an unvaccinated person is less likely to get the disease since others are less likely to become sick from it and spread the disease.

Did you know?

Tobacco depletes the body of vitamins A, C, and E, which can result in any of the following: dry hair, dry skin, dry eyes, poor growth, night blindness, abscesses, insomnia, fatigue, reproductive system problems, sinusitis, pneumonia, frequent respiratory problems, skin disorders, weight loss, rickets, osteomalacia, nervousness, muscle spasms, leg cramps, extremity numbness, bone malformations, decayed teeth, difficulty in walking, irritability, restlessness, profuse sweating, increased uric acid (gout), joint damage, damaged red blood cells, destruction of nerves, infertility, miscarriage, and many types of cancer.

Did you know?

It is difficult to obtain enough calcium without consuming milk or other dairy foods.

For a complete list of videos, visit our video library