(Transcript of audio with descriptions. Transcript includes narrator headings and description headings of the visual content)
(Speaker)
This question is going to be similar to part a, but now you are asked to find the marginal product of labor and the value of the marginal product of labor if the price of pizza increases to 4 dollars.
(Description)
The table from the previous slide is shown. The only difference is that columns, MPL (pizzas per worker), and, VMPL subscript 1 (per worker) (price of pizza equals 2 dollars), are blank.
The following text is written above the table:
C. Now the price of pizza increases to 4 dollars. Calculate the value of the marginal product of labor per worker, how many workers Patty should employ now.
(Speaker)
Repeating the steps from part a, we can see that the marginal product of hiring the first worker remains 9.
(Description)
A cell at the intersection of the second row and the column MPL is, equals 9 minus 0 equals 9.
(Speaker)
You will notice the marginal product of labor remains the same for all workers.
(Description)
A cell at the intersection of the third row and the column MPL is, equals 15 minus 9 equals 6.
A cell at the intersection of the fourth row and the column MPL is, equals 19 minus 15 equals 4.
A cell at the intersection of the fifth row and the column MPL is, equals 22 minus 19 equals 3.
A cell at the intersection of the sixth row and the column MPL is, equals 24 minus 22 equals 2.
(Speaker)
Because the price of pizza has increased to 4 dollars, the value of the marginal product will increase. In fact, it will double since the price has doubled.
For the first worker, they will produce 36 dollars of pizza, 4 dollars times 9.
(Description)
A cell at the intersection of the second row and the column VMPL subscript 1 is, equals 9 times 4 dollars equals 36 dollars.
(Speaker)
We can go ahead and do this for the remaining workers.
(Description)
A cell at the intersection of the third row and the column VMPL subscript 1 is, equals 6 times 4 dollars equals 24 dollars.
A cell at the intersection of the fourth row and the column VMPL subscript 1 is, equals 4 times 4 dollars equals 16 dollars.
A cell at the intersection of the fifth row and the column VMPL subscript 1 is, equals 3 times 4 dollars equals 12 dollars.
A cell at the intersection of the sixth row and the column VMPL subscript 1 is, equals 2 times 4 dollars equals 8 dollars.
(Speaker)
And again, you will notice the value of the marginal product has doubled as the price doubled. Finally, we need to find optimal number of workers Patty should hire. Patty will hire workers as long as the value of the marginal product exceeds the wage rate. Patty will choose to hire the fourth worker, which provides a value of 12 dollars, but not the fifth worker whose value is only 8 dollars.
(Description)
The fifth row of the table with the corresponding data is highlighted. It is labeled as Patty will employ more workers as long as the VMPL is greater than the wage rate. As the price of pizza increases Patty will hire more workers, in this case she will hire 4 workers.