Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 19, Problem 2DQ
To determine
Explain whether this statement is a refutation of the marginal productivity theory.
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Use the following information to answer the following questions:
Mickey L. Douglas, owner of MLD Incorporated, knows that the marginal product of labor (MPL) for his
workers can be defined as follows:
MPL = 32 - L
The total output a given level of workers can produce is found as:
Q=32L-1/2 L²
He also knows that the price of his output is $3. His profits can be found as:
Profit=(PxQ)-(W x L)
What wage would be required to allow Mickey to hire the twenty-fifth worker?
O $21
O $7
O $125
O $3
$25
"If the wage rate paid to one form of labor is twice the cost of another form of labor, the first type of labor must be twice as productive."
Which of the following is required for all workers to earn identical wages in the long run? Check all that apply.
Chapter 19 Solutions
Economics: Principles & Policy
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Similar questions
- Why does a profit-maximizing firm hire workers up to the point where the wage equals the value of marginal product? Show that this condition is identical to the one that requires a profit-maximizing firm to produce the level of output where the price of the output equals the marginal cost of production.arrow_forwardWhat is the difference between and Accounting Profit and an Economic Profit? How does Technology affect the Demand for Labor?arrow_forwardSuppose that the process of producing mozzarella sticks is described by the following production function: Q = KL^2. If the price of renting shaping machine is $10 and the price of hiring labor is $15. What is the capital output ratio?arrow_forward
- Using the figure below, if Company X hires 12 workers what will their marginal product be? 15 10 5 1 4 8 12 16 Labor Provide your answer below: MP1 Marginal Product (MP,)arrow_forwardAnswer the given question with a proper explanation and step-by-step solution. Consider the Labor Economics Question. This will provide insight into the idea of the optimal number of workers and the value of the marginal product of labor. If wages in the restaurant is $16.80 per hour and the price of a Hamburger is $4.20 and the production function for the workers is: Q = 6L – 0.25L2^2 a. How many workers should Your Restaurant employ during the lunch hour to maximize profits? (note—the value of the marginal product of labor and the marginal revenue product are the same) We maximize profits which are total revenues less total costs: b. Compute the maximum profit at Your Restaurant. (note—consider that profit involves Total Revenue and Total Costs). c. Compute the profit created if You hire an additional worker. Explain why it is or is not profit maximizing to hire an additional worker. d. Suppose instead that You wants to keep the lines as short as possible by maximizing production.…arrow_forwardAs the productivity of labor rises, so will the demand for labor. True – False: Explainarrow_forward
- Using the production schedule table in question 1, Marginal Productivity reaches a maximum with the hiring of which worker? Using the production schedule table in question 1, between which two workers is Average Product maximized? Using the production schedule table in question 1, what is the maximum number of workers that the firm would hire?arrow_forwardWidget factory Inc. in Wisconsin has the following production function: F(L,K)=2L L represents the number of labours hours. Workers at this factory are paid an hourly wage of $30 and they rent capital at$25/ hour.since this is a competitive market, the factory output is $50 per unit. Let's pretend the firm operates in the short run with capital fixed at 900, how many workers would widget factory Inc employ? What is their profit rate?arrow_forwarda) Graph the TP, MP and AP data below. Clearly identify the 3 stages of production by drawing dotted lines vertically at the appropriate labor levels (increasing returns, decreasing returns, negative returns). productarrow_forward
- Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 130). Then the marginal product of the 13th worker isarrow_forwardExplain the marginal productivity theoryarrow_forwardProducer Theory A firm has the following Production Function: Q=3K²L² and w=P₁= $10 r=P = $90 a) If the profit maximizing firm is committed to producing output Q = 6300 units at least cost, what are the optimal amounts of capital and labour the firm should employ? Illustrate your answerarrow_forward
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