I The table below gives data on output for a firm in the short run. The firm is

Question

I The table below gives data on output for a firm in the short run. The firm is able to hire labor and its TPP is given. Compute the MPP and MRP for labor if the price of the good is fixed at S12 per unit. The firm must pay workers S40 a day. How many workers should this profit maximizing firm hire? LABOR MPP MRP TPP 4 15 21 26 30 4 35 36 II Complete the following table and determine the point of profit maximization, using marginal analysis as well as total profit. Total RevenueMarginal RevenueTotal Cost Marginal Cost Profit Quantity 100 101 102 103 104 105 106 107 108 109 110 500 504.95 509.85 514.70 519.50 524.25 528.95 533.60 538.20 542.75 547.25 200 204.50 209·10 213.80 218.60 223.50 228.50 233.60 238.80 244·10 249.50

Explanation / Answer

ANSWER 1 : TABLE SHOWING INFORMATION:

Since the wages given to worker = $40

So the rule is MRP>AND EQUAL TO WAGES are hired as workers

The firm hired 6 workers as there MRP is greater than 40 . But after that MRP has goes down . So the optiumal number of workers hired is 6.

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Answer : TABLE SHOWING INFORMATION ABOUT PROFIT :

300

298.65

Profit maximisation point of a firm is MR= MC at 4.8 where Quantity 104 units and profit is 300.

LABOUR TPP MPP MRP (MPP*PRICE PER UNIT) 1 4 - - 2 9 5 60 3 15 6 72 4 21 6 72 5 26 5 60 6 30 4 48 7 33 3 36 8 35 2 24 9 36 1 12

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