Author Question: The above table has the marginal product schedule for a firm. If the firm is a perfect competitor ... (Read 54 times)

joblessjake · **on:** Jun 29, 2018

The above table has the marginal product schedule for a firm. If the firm is a perfect competitor and the price of the product is constant at 2 a unit, complete the table. If the wage rate is 8 an hour, how many workers does the firm hire?

What will be an ideal response?

Question 2

Are the curves in the figure above drawn CORRECTLY? If not, what's wrong?

What will be an ideal response?

ultraflyy23 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Quantity of labor
(workers) Marginal product
(units per hour) Value of marginal product
(dollars)
1 10 20
2 8 16
3 6 12
4 4 8

If the wage rate is 8 an hour, the firm hires 4 workers because that is the quantity that sets the value of marginal product equal to the wage rate.

Answer to Question 2

The curves are not drawn correctly. First, the marginal cost curve must intersect the average variable cost curve and the average total cost curve where they are at their minimums, which is not the case in the figure. Second, the vertical distance between the ATC curve and the AVC curve is the AFC, which decreases as output increases. So the vertical distance between the ATC curve and the AVC curve should shrink in size, which is not the case in the figure.