Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 7, Problem 4TY
To determine
The long run period of the firm.
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Students have asked these similar questions
Labor demand In the long-run:describe what a firm will do when its long-run
condition is not met, i.e, when will it hire more or less labor?
For Question 53, and 54, use the table below. The table provides information about output (Q) the firm produces, revenues in a perfectly competition firm using factor of
production labor FP (L) which represents workers. For example, a total of 2 workers produces 15 units per-hour.
TR is total revenue. MR is marginal revenue, MP is marginal product and MRP is marginal revenue product.
Given this information, how much is the MP for worker (L) for worker 2 and 3.
P
Q
0
15
O 5 and 5
O 35 and 25
07 and 5
O Band 7
TR
0
100
MR
MP
MRP
FP (L)
0
Widget 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?
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Similar questions
- A firm produces good Y with just 2 factors: Capital which is fixed in supply and labour which is variable. Identify the stages of production in the diagram and explain why the firm still hire labour even though it is in the range of diminishing returns. What is the number of workers after which diminishing marginal returns starts? Is this a short run or long run phenomenon? Labour (units) 1 2 3 4 5 6 7 8 9 Total Product (TP) in Units 8 15 24 30 35 37 38 38 36 Average Product (AP) in units 8 7.5 8 7.5 7 6.17 5.43 4.75 4 Marginal Product (MP) in units 8 7 9 6 5 2 1 0 -2arrow_forwardSuppose the hourly wage is $20 and the price of each unit of capital is $2. The price of output is constant at $20/unit. The production function and marginal product function, respectively, are shown below. If the current capital stock is fixed at 2,500 units, how much labor should the firm employ in the short run? Show your work.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
- In 2005 General Motors (GM) announced that it would reduce employment by 30,000 workers. What does this decision reveal about how it viewed its marginal revenue product (MRP) and marginal resource cost (MRC)? Why didn’t GM reduce employment by more than 30,000 workers? By fewer than 30,000 workers?arrow_forwardQuestion 21.21. Which would be an implicit cost for a firm? The cost of worker wages and salaries for the firm. paid for leasing a building for the firm. paid for production supplies for the firm. of wages foregone by the owner of the firm.arrow_forwardSuppose the hourly wage is $2 and the price of each unit of capital is $5. The price of output is constant at $20 per unit. The production function is: 1,K f(E, K) = 2 E where K is the capital stock and E is the level of employment. If the current capital stock is fixed at 400 units: (a) How much labor should the firm employ in the short run? (b) How much profit will the firm earn?arrow_forward
- Question 16 When is it not in the best interest of a company to hire additional workers in the short run? when the average product of labor is decreasing when the firm is in Stage II of the production process when the marginal revenue product equals zero when the wage rate is equal to or greater than labor's marginal revenue productarrow_forwardSuppose that a car factory initially hires 1,600 workers at $20 per hour and that each worker works 40 hours per week. Then the factory unionizes, and the new union demands that wages be raised by 25 percent. The firm accedes to that request in collective bargaining negotiations but then decides to cut the factory’s labor force by 30 percent due to the higher labor costs.arrow_forwardIf the marginal product of labor increases because of a technological advancement, it will likely cause a fall in the number of workers employed. an increase in the price of output produced by labor. a fall in the wage paid to labor. an increase in demand for labor. an increase in the supply of labor.arrow_forward
- In 2009 General Motors (GM) announced that it would reduce employment by 21,000 workers. What does this decision reveal about how GM viewed its marginal revenue product (MRP) and marginal resource cost (MRC)? Why didn’t GM reduce employment by more than 21,000 workers? By fewer than 21,000 workers?arrow_forwardShow in schedule form and graphically the labor demand curve of this firm.arrow_forward
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