Step 1
Work It Out
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You must read each slide, and complete any questions on the slide, in sequence.
Patty’s Pizza Parlor has the production function per hour shown in the accompanying table. The hourly wage rate for each worker is $10. Each pizza sells for $2.
| Quantity of labor (workers) | Quantity of pizza |
|---|---|
| 0 | 0 |
| 1 | 9 |
| 2 | 15 |
| 3 | 19 |
| 4 | 22 |
| 5 | 24 |
Calculate the marginal product of labor for each worker and the value of the marginal product of labor per worker.
| Quantity of labor (workers) | Quantity of pizza | MPL (pizzas per worker) | VMPL1 (per worker) (price of pizza = $2) |
|---|---|---|---|
| 0 | 0 | ||
| 1 | 9 | $ | |
| 2 | 15 | ||
| 3 | 19 | ||
| 4 | 22 | ||
| 5 | 24 |
The marginal product of labor is calculated as the change in the quantity of pizza’s made divided by the change in the quantity of labor. As Patty hires one worker, the quantity of pizza’s made increases from zero to 9. Thus, the marginal product of the first worker is 9 pizzas. The value of the marginal product of labor per worker is found by multiplying the marginal product of labor by the price of each pizza. The first worker can produce 9 pizzas which sell for $2 per pizza giving a value of $18 to the first workers output. For further review see section, “Value of the Marginal Product.”
Calculate the marginal product of labor for each worker and the value of the marginal product of labor per worker.
The marginal product of labor is calculated as the change in the quantity of pizza’s made divided by the change in the quantity of labor. As Patty hires one worker, the quantity of pizza’s made increases from zero to 9. Thus, the marginal product of the first worker is 9 pizzas. The value of the marginal product of labor per worker is found by multiplying the marginal product of labor by the price of each pizza. The first worker can produce 9 pizzas which sell for $2 per pizza giving a value of $18 to the first workers output. For further review see section, “Value of the Marginal Product.”
Calculate the marginal product of labor for each worker and the value of the marginal product of labor per worker.