Answer to Question #223187 in Microeconomics for henvi

Question

Suppose LA.Banana employs workers to harvest bananas. Answer the following questions using the information provided below:

Quantity of labour:

1. 0 labour
2. 1 labour
3. 2 labour
4. 3 labour
5. 4 labour
6. 5 labour
7. 6 labour

Units of Output:

1. 0 banana
2. 16 banana
3. 21 banana
4. 25 banana
5. 31 banana
6. 36 banana
7. 40 banana

a.) Calculate the marginal product of labor, the value of the marginal product of labor, and the marginal profit ,suppose a fully competitive company, LA"Banana, where wages are fixed at $800 and each banana (output) sells for $20. Explain how many labors the company should and should not demand based on your answer.

b. ) Describe and give some explanations about 2 factors that would cause most companies' labor demand to move, as well as how this would influence equilibrium wages and the value of labor's marginal product.

Answer 1

a.

Marginal productity of labour = change in the output ÷ change in input labour

Marginal productivity of labour:

1. 0
2. 16 MPL
3. 5 MPL
4. 4 MPL
5. 6 MPL
6. 4 MPL
7. 4 MP

Sales price of each banana is 20

Marginal profit= mpl x price of banana

Marginal PROFIT

1. 0 MPL
2. 320
3. 100
4. 80
5. 120
6. 80
7. 80

The value of marginal productivity of labour at the competitive market is 16

2 units of labour should be demanded becasuse it gives maximum profit

b.

i. A change in the quantity demanded of the product that the labor produces. The change in demand for labour companies will either shift the labour upwards or downwards. Increase in the demand of labour increases the marginal productivity of labour

ii. A change in the production method that is either labour intensive or capital intensive. If a firm adopts labour intensive method then it definatel needs a lot of manpower. Marginal productivity of labour in this instance will substantially increase. I f the firm adopts a capital intensive method in their production process then less labour is needed and this reduces significantly the marginal productivity of labour.