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Chapter 11

Question 16
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You must read each slide, and complete any questions on the slide, in sequence.

In the following table, suppose the price of output is $10 per unit.

Number of Workers Units of Output
1 50
2 110
3 170
4 220
5 250
6 270

A. What is the marginal physical product of the sixth worker? units
Correct! The marginal physical product is the additional output produced when one more worker is hired. Since the first 5 workers produce 250 units of output, and six workers produce 270 units, the sixth worker increased output by 20 units (270 – 250).
Incorrect! The marginal physical product is the additional output produced when one more worker is hired. Since the first 5 workers produce 250 units of output, and six workers produce 270 units, the sixth worker increased output by 20 units (270 – 250).
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      B. What is the marginal revenue product of the sixth worker? $
      Correct! The marginal revenue product is the dollar value of a worker’s marginal physical product. In this case, the marginal product is 20 units, and since each unit is worth $10, the marginal revenue product is 20 × $10 = $200.
      Incorrect! The marginal revenue product is the dollar value of a worker’s marginal physical product. In this case, the marginal product is 20 units, and since each unit is worth $10, the marginal revenue product is 20 × $10 = $200.
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          C. If the wage of each worker is $150, should the sixth worker be hired?

          		A.
          		B.
          Correct! It is profitable to hire an additional worker if the marginal benefit is greater than the marginal cost. Here, the sixth worker contributes $200 worth of revenue, but costs only $150. The employer receives ($200 – $150) = $50 more when the sixth worker is hired.
          Incorrect! It is profitable to hire an additional worker if the marginal benefit is greater than the marginal cost. Here, the sixth worker contributes $200 worth of revenue, but costs only $150. The employer receives ($200 – $150) = $50 more when the sixth worker is hired.
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