Answer to Question #150030 in Microeconomics for John Dickson

Question

Supposed that labor is the only input (=short run) by a firm in a perfectly competitive market. The firm’s production function is expressed in a table as follows.
labor supply (days) units of output
0 0
1 7
2 13
3 19
4 25
5 28
6 29
7 29

A. Calculate the marginal product for each of additional worker (create your table).
B. Each unit of output sells for $10. Calculate the value of the marginal product of each worker.
C. Compute the demand schedule (for labor) showing the number of workers hired for all wage levels from zero to $100 per day.
D. Graph the firm’s demand curve for labor.
E. What happens to this demand curve if the price of output rises from 10 dollars to 15 dollars?

Answer 1

A. B.

L Q MR MRP

0 0 - -

1 7 7 70

2 13 6 60

3 19 6 60

4 25 6 60

5 28 3 30

6 29 1 10

7 29 0 0

C. The demand schedule (for labor) for all wage levels from zero to $100 per day will be decreasing.

D. The demand curve for labor will be downward-sloping.

E. This demand curve will increase and shift rightwards if the price of output rises from 10 dollars to 15 dollars.