Q3. If your company is operating in a perfectly competitive market, and the

following data were collected on its major product, you are required to answer

the following;

(20 Marks)

Labor

input

Total

product

Marginal product Marginal

Revenue

0 0

1 40

2 90

3 145

4 205

5 255

6 295

7 325

8 345

9 355

10 360

11 350

a. Calculate the marginal product

b. If price is set in the market at $ 1, calculate the marginal revenue.

c. If the company costs are all variable, and given that the wage per labor (cost

of labor) is $300, find the number of labor input that would maximize the

company profits.

d. If the company changed the price from $ 1 to $ 1.5, the quantity demanded

was found to decline from 100 units to 50 units; calculate the price elasticity

of demand using the average formula, state the type of elasticity, and indicate

whether you encourage raising or lowering the prices to maximize revenues.