1. Using the table above calculate the marginal product of labor. 2. Calculate t

Question

1. Using the table above calculate the marginal product of labor.

2. Calculate the value of the marginal product of labor for each quantity of labor.

3. How many workers should Scott’s tea hire?

4. How does the value of workers output change? How does changes in the price of the good affect the value of the marginal product of labor?

5. What is the marginal productivity theory of income distribution?

The table shows Scott's Tea production function per day. The equilibrium wage rate for labor is $90. Each tea cost $1.5. Quantity of LaborQuantity of Tea 100 200 290 360 420 470

Explanation / Answer

1. Refer table.

2. Refer table.

3. 5 labor. Because at 5 labor MR = MC

4.

5. The marginal productivity theory of income distribution refers to the idea that every factor of production that is sold in a factor market is paid its equilibrium value of the marginal product, or the additional value generated by employing the last unit of that factor in the factor market as a whole.

QL QT MPL Total Cost($) =QL*wage rate MC VMPL = P* QT MR 0 0 - 0 - 0 1 100 100 90 90 150 150 2 200 100 180 90 300 150 3 290 90 270 90 435 135 4 360 70 360 90 540 105 5 420 60 450 90 630 90 6 470 50 540 90 705 75

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