Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A firm that is hiring labour (L) and capital (K) competitively is selling its product (Q) in a competitive market as given in the following

A firm that is hiring labour (L) and capital (K) competitively is selling its product (Q) in a competitive market as given in the following table. The price of a product Q is $4. Each worker costs $20 and each capital costs $5.

L

K

Q

MPL

VMPL

0

4

1

4

20

2

4

37

3

4

51

4

4

62

5

4

70

6

4

75

7

4

77

8

4

76

a. Complete the columns of Marginal Product of Labour (MPL) and Value of the Marginal Product of Labour (VMPL) in the above table. (2 marks)

b. How many workers will the firm hire? Explain why? (3 marks)

c. Calculate the maximum profit that this firm will earn. (2 marks)

d. Unemployment has gone up due to the COVID-19 pandemic. As a result, the wage rate has fallen from $20 to $8. Recalculate the number of workers this firm will now hire and its maximum profit.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Advanced Macroeconomic Theory

Authors: Ola Olsson ]

1st Edition

9780415685085

Students also viewed these Economics questions

Question

Find all orders of subgroups of the given group. Z 12

Answered: 1 week ago

Question

Values: What is important to me?

Answered: 1 week ago

Question

Purpose: What do we seek to achieve with our behaviour?

Answered: 1 week ago

Question

An action plan is prepared.

Answered: 1 week ago