Question
Pohl Manufacturing Company finds that as it increases the number of workers it hires, the number of hockey pucks produced daily changes as follows: Workers
Pohl Manufacturing Company finds that as it increases the number of workers it hires, the number of hockey pucks produced daily changes as follows:
Workers | Hockey Pucks |
1 | 10 |
2 | 30 |
3 | 60 |
4 | 100 |
5 | 135 |
6 | 165 |
7 | 190 |
8 | 210 |
9 | 225 |
10 | 235 |
11 | 240 |
12 | 240 |
13 | 235 |
a) The price of hockey pucks can be $2, $3, or $4 each. For each number of workers, calculate the marginal physical product, the average physical product, and the three marginal revenue products corresponding to the three hockey puck prices.
b) On graph paper, plot the MPP and the APP.
c) On the graph, show the phases of increasing returns to labor, diminishing returns, and negative returns.
d) Assume the price of hockey pucks is $2. If the wage rate of labor is $40 a day, how many workers will Pohl hire? Note that there are two employment levels at which the wage equals the MRP; why did you pick one of them?
e) When the wage rises to $60 and Price of hockey pucks is still $2, what will the new employment level be?
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