First scenario: output price is given

The table (below) gives the total output, per day, for anywhere from 0 to 17 workers.

Your task is to determine how many workers to hire at five different wage rates, ranging from $90/day up to $250/day. The wage rate includes all relevant benefits. To get to this answer you will need to calculate the marginal product of labor and the marginal revenue product of labor.

Cost of the other (non-labor) inputs that go into a pair of sunglasses (and would need to be increased if more labor was hired and output increased) = $45.00

Price received per pair of sunglasses = $64.00

Marginal product of labor is the change in total product when labor is increased by one.

Marginal Revenue Product (net of the cost of the other required inputs), when the output price is fixed) equals marginal product times the ((fixed) output price -$45)

Please note: A few of the table values are filled in. Use these to determine if your approach to the problem is correct.

Number of workers: Total product Marginal product of labor Marginal Revenue Product (net of the cost of the other required inputs)

0 0

1 12

2 26 14 $266.00

3 43

4 62

5 83

6 103

7 122

8 140

9 157

10 172 15 $285.00

11 185

12 196

13 205

14 212

15 217

16 219

17 219

Using the information from above, fill in the following 'derived demand' schedule:

Daily wage Number of workers to maximize profits

$90.00

$130.00

$170.00

$210.00

$250.00