Answer to Question #220033 in Microeconomics for Khushi

Question

You are given the following schedule for the production of pens by a firm
Labor Total Product
0 0
1 20
2 50
3 70
4 80
5 85
6 82
If pen sells for Rs 3 per unit and workers can be hired in a competitive labor market for Rs30
per day, how many workers should be hired? Explain your answers clearly.

Answer 1

Labor Output MP MRP

0 0 0 -

1 20 20 60

2 50 30 90

3 70 20 60

4 80 10 30

5 85 5 15

6 82 -2 -

 TR - TC

(3 X 70) - ( 3 X 30) = 120

In a competitive market I would hire three workers since marginal revenue of labor of hiring three workers is 30 units higher than the wages per day. Marginal revenue of labor of hiring three workers is economical than hiring four workers.