Kaisers produces smoothies. The market for smoothies is perfectly competitive, and the price of a smoothie is

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Kaiser’s produces smoothies. The market for smoothies is perfectly competitive, and the price of a smoothie is $4. The labor market is competitive, and the wage rate is $40 a day. Table 1 shows Kaiser’s total product schedule.

TABLE 1 Workers 123456 Smoothies per day 7 21 33 43 51 55

1. Calculate the marginal product and the value of marginal product of the fourth worker.

2. How many workers will Kaiser’s hire to maximize its profit? How many smoothies a day will Kaiser’s produce?

3. If the price of a smoothie rises to $5, how many workers will Kaiser’s hire?

4. Kaiser’s installs a machine that increases the marginal product of labor by 50 percent. If the price of a smoothie remains at $4 and the wage rate rises to $48 a day, how many workers does Kaiser’s hire?

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Foundations Of Economics

ISBN: 9780134486819

8th Edition

Authors: Robin Bade, Michael Parkin

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