Author Question: A bakery producing bread reports the following production information: Workers Total Product ... (Read 165 times)

ec501234 · **on:** Jun 29, 2018

A bakery producing bread reports the following production information:

Workers Total Product
(loaves of bread per hour)
0 0
1 35
2 65
3 85
4 100
5 110

The bread sells in a competitive market at a price of 0.30 each. The firm hires workers in a competitive labor market at a wage of 7 per hour. How many workers should the firm hire? Explain your answer.

Question 2

A firm producing ink pens reports the following production information:

of Workers Total Product
(boxes of pens per hour)
0 0
1 45
2 80
3 100
4 116
5 126
6 131

The pens sell in a competitive market at a price of 0.50 per box. The firm hires workers in a competitive labor market at a wage of 9 per hour. How many workers should the firm hire? Explain your answer.

kthug · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The firm should hire two workers. The marginal revenue product of the second worker is 9 (30 x 0.30), which is greater than the wage of 7 . However, the marginal revenue product of the third worker is only 6 (20 x 0.30), which is less than the wage.

Answer to Question 2

The firm should hire three workers. The marginal revenue product of the third
worker is 10 (20 x 0.50), which is greater than the wage of 9 . However, the
marginal revenue product of the fourth worker is only 8 (16 x 0.50). It would
not be profitable for the firm to hire the fourth worker and thus only three
workers would be hired.