Martin\'s workers in the area are paid a fixed wage rate of S125 per day. Use th

Question

Martin's workers in the area are paid a fixed wage rate of S125 per day. Use this information and the information in the table below to answer the questions that follow. Assume that the milk farm is profit maximizing ical Milk Farm es cow's milk and sells it to a local store for $2.20 per gallon. Agricultural Workers Quantity What is the marginal product of labor (MPL) of milk per day (gallons) 0 100 195 for employing a third worker? Number 0 gallons 2 What is the value of the marginal product of labor (VMPL) for employing a sixth worker? 275 325 350 370 Number 6 How many employees should Martin's farm employ? Number employees How many employees should Martin's farm employ if the price he received per gallon of milk rose to $2.50? Number

Explanation / Answer

Ans:

Marginal product is the additional output from employing a additional worker.

value of the marginal product of labor = marginal product * selling price

Table showing marginal product of labor and value of the marginal product of labor.

1) Marginal product of labor of third worker is 80 gallons

2) Value of Marginal product of labor of sixth worker is $44.

3) 3 workers

The profit maximizing level of output is where value of Marginal product of labor is equal to marginal cost.The marginal cost is wages paid to worker which is $125 per day.The firm should employ 3 workers.

4) 4 workers

When the selling price per gallon of milk is $2.5, the firm should employ 4 workers.

Labor Quantity Marginal product of labor Value of marginal product of labor when the selling price is $2.2 per gallon Value of marginal product of labor when the selling price is $2.50 per gallon 0 0 0 0 1 100 100 220 250 2 195 95 209 237.5 3 275 80 176 200 4 325 50 110 125 5 350 25 55 62.5 6 370 20 44 50

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