Labor Input (workers per week)(lawns mowed per Price ($/lawn) Total Output week)
ID: 1115860 • Letter: L
Question
Labor Input (workers per week)(lawns mowed per Price ($/lawn) Total Output week) 0 20 39 57 74 90 105 50 50 50 50 50 50 50 4 5 Question 3: Suppose that Larry's Lawncare has the production function above for mowing ½-acre lawns. If Larry wants to maximize his profit, what is the maximum amount that he should pay the 3rd worker per week? 1) S28.50 C 2) $57 C 3) $1950 C 4) $900 Question 4: Suppose that Larry's Lawncare has the production function above for mowing ½-acre lawns. What is the value ofthe margina/product of the 2nd Worker? C 1 $950 per week C 2) 39 lawns per week C 3) 19 lawns per week C 4) $2950 per week Question 5: Suppose that Larry's Lawncare has the production function above for mowing ½-acre lawns. What is the margina/product of the 6th worker? C 1) S15 per week C 2) 15 lawns per week C 3) $5250 per week C 4) 90 lawns per weekExplanation / Answer
(Question 3) Option (4)
Labor demand is optimal when
Marginal product of labor (MPL) x Output price (P) = Wage rate (W)
MPL = Change in Output (Q) / Change in labor (L)
When L = 3, MPL = (57 - 39) / (3 - 2) = 18 / 1 = 18
Maximum wage (W) = 18 x $50 = $900
(Question 4) Option (1)
When L = 2, MPL = (39 - 20) / (2 - 1) = 19 / 1 = 19
Value of marginal product = 19 x $50 = $950
(Question 5) Option (1)
When L = 6, MPL = (105 - 90) / (6 - 5) = 15 / 1 = 15
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