Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 11, Problem 10P
(a)
To determine
Wage rate for second worker (if hired)
(b)
To determine
Rental rate of hiring a second machine.
(c)
To determine
Number of workers hired at wage rate
(d)
To determine
Nature of pottery wheels as a technological development.
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Suppose you are considering hiring another worker. Also assume that you are at a firm that is operating at a point where the marginal product of labor is 5 and the price of each unit of labor is $2, and the marginal product of capital is 20 and the price of each unit of capital is $10. Should you hire another worker?
If you hire another worker, what will happen to the marginal product of labor and why?
Assume that a firm has a plant of fixed size and that it can vary its output only by varying the amount of labor it
employs. The table below shows the relationships among the amount of labor employed, the output of the firm,
the marginal product of labor, and the average product of labor.
(a) Assume each unit of labor costs the firm $20. Compute the total cost of labor for each quantity of labor the
firm might employ, and enter these figures in the table.
(b) Now determine the marginal cost of the firm's product as the firm increases its output. Enter these figures
in the table.
(c) If labor is the only variable input, the total labor cost and total variable cost are equal. Find the average
variable cost of the firm's product. Enter these figures in the table.
(d) Describe the relationship between the marginal product of labor and the marginal cost of the firm's product.
(e) Describe the relationship between the average product of labor and the average variable cost.
Quantity of
labor…
You own a coffee shop and use both labor and capital to make lattes. Currently, the
marginal product of labor is 50 lattes a day while the marginal product of capital is
20 lattes a day. You pay your labor $100/day, and you rent your Nuova Simonelli
Appia Life Black 2 espresso machine for $25 a day. The price of a latte is $5. Are you
employing your inputs effectively? If not, what would you do to increase efficiency?
Chapter 11 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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