Chapter 1. Chapter 11a

Step 1

Solved Problems
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You must read each slide, and complete any questions on the slide, in sequence.

Question

The following chart gives the output (Q) produced by a firm given the number of labor inputs (L). The price of the product is $6.

L Q MPL P MRPL
0 0 6
1 12 DDH6Tw1RFEk=
2 28 zhw5AiG32jY=
3 40 DDH6Tw1RFEk=
4 48 L6bSXEGJIC8=
5 54 yBhAQ+3VvjM=
6 57 607M7xmPORU=
7 59 XvVM00l89Is=
8 60 0VV1JcqyBrI=
Table

Fill in the column for MPL (the marginal product of labor).

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MPL = the change in Q as L increases by a unit. For example, if Q changes from 0 to 12 when one worker is added, 12 – 0 = 12.

Step 2

Question

Fill in the column for P (the product price).

L Q MPL P MRPL
0 0 6
1 12 12 yBhAQ+3VvjM=
2 28 16 yBhAQ+3VvjM=
3 40 12 yBhAQ+3VvjM=
4 48 8 yBhAQ+3VvjM=
5 54 6 yBhAQ+3VvjM=
6 57 3 yBhAQ+3VvjM=
7 59 2 yBhAQ+3VvjM=
8 60 1 yBhAQ+3VvjM=
Table
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P is always $6 in this question and does not depend on labor input, quantity produced, or any other variable.

Step 3

Question

Fill in the column for MRPL (the marginal revenue product of labor).

L Q MPL P MRPL
0 0 6
1 12 12 6 /xrxhEs3TVs=
2 28 16 6 3JhXP9wN7DE=
3 40 12 6 /xrxhEs3TVs=
4 48 8 6 bDGqlNBwCCQ=
5 54 6 6 SBORzTQMUMc=
6 57 3 6 XfbQwBcbq1Q=
7 59 2 6 DDH6Tw1RFEk=
8 60 1 6 yBhAQ+3VvjM=
Table
3
MRPL = MPL x P. For example, if MPL = 12, and P = $6, then MRPL = 12 x $6.

Step 4

Question

L Q MPL P MRPL
0 0 6
1 12 12 6 72
2 28 16 6 96
3 40 12 6 72
4 48 8 6 48
5 54 6 6 36
6 57 3 6 18
7 59 2 6 12
8 60 1 6 6
Table
+iT7sk9CEGZPO5k0VhAqYXQ0OGWWqq9TMt5R26Sk8c3CE1PkUm24Qh0YRdtxfjYasDjnUdbv+jBcVGmfAN8OcM4Bqkoe/9nvNt6Nby0+QYc4POfDuTUN73F3n8/EnVvs4525/SKu07g=
3
Firms in perfectly competitive markets hire up to the point where marginal cost equals marginal benefit, or wage = MRPL. MRPL = $36 where L = 5.

Step 5

Question

L Q MPL P MRPL
0 0 6
1 12 12 6 72
2 28 16 6 96
3 40 12 6 72
4 48 8 6 48
5 54 6 6 36
6 57 3 6 18
7 59 2 6 12
8 60 1 6 6
Table
9JngPrx4s2bn1Wtw63sBkmA3dKsa6XoeZtfxldlH1cpktKfoGck1q7Led14MDr4pUsSpDFTgqqGewVq5N55ev7bmfjPwvJEAYgXxXIMRvYCrFEfZNXEmDpt6xe0KkF7A7oQ1aYO/cGs=
3
Firms in perfectly competitive markets hire up to the point where marginal cost equals marginal benefit, or wage = MRPL. MRPL = $18 where L = 6.

Step 6

Question

In general, the quantity of labor demanded can be expected to YatXsq/9Lm4QlK44Eo2Jj8C5H2JR1C0E7/EP0OPKVP4+MbBjHmrWSQ== if wages decrease.

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The previous two questions show that equilibrium L increases when the wage is lower. The concept is similar to a traditional demand curve: Q increases if P decreases.