Question

Microeconomics

Posted 5 months ago

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The table below shows the marginal revenue product of labor $\left(M R P_{L}\right)$ of a firm producing pillows. The firm uses various amounts of labor, and it can sell as many pillows as it wants for $\$ 10$.
\begin{tabular}{ll}
Labor & MRP \\
\hline 0 & - \\
1 & $\$ 300$ \\
2 & $\$ 250$ \\
3 & $\$ 200$ \\
4 & $\$ 150$ \\
5 & $\$ 100$ \\
6 & $\$ 50$ \\
7 & $\$ 0$
\end{tabular}
What is the marginal product of the fourth worker?
Choose 1 answer:
(A) 1 pillow
(B) 10 pillows
(C) 50 pillows
(D) 15 pillows
(E) 20 pillows
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Answer from Sia

Posted 5 months ago

Solution

a

Marginal Revenue Product (MRP) Definition: The marginal revenue product of labor (MRP_L) is the additional revenue generated from employing one more unit of labor

b

MRP Calculation: Given that the firm can sell as many pillows as it wants for $10, the MRP for each worker is calculated as the marginal product (MP) of labor multiplied by the price of the product

c

MRP of Fourth Worker: From the table, the MRP of the fourth worker is $150

d

Marginal Product Calculation: To find the marginal product (MP) of the fourth worker, we use the formula $MRP = MP \times P$. Given $MRP = 150$ and $P = 10$, we solve for $MP$:
$150 = MP \times 10$
$MP = \frac{150}{10} = 15 \text{ pillows}$

Answer

(D) 15 pillows

Key Concept

Marginal Revenue Product (MRP)

Explanation

The marginal revenue product of labor is the additional revenue generated from employing one more unit of labor. Given the MRP and the price of the product, we can calculate the marginal product of labor. For the fourth worker, the MRP is $150, and the price per pillow is$10, leading to a marginal product of 15 pillows.

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