Below is a table showing the production numbers for a chair factory (where the p
ID: 1208117 • Letter: B
Question
Below is a table showing the production numbers for a chair factory (where the production numbers are based on chairs being produced per day).
Workers
Total Product
(TP)
Average Product
(AP)
Marginal Product (MP)
Marginal Revenue Product
(MRP)
0
0
-
-
-
1
10
2
15
3
40
4
35
5
190
6
30
7
240
8
250
9
5
a) Fill in the missing numbers for the TP, AP and MP columns (round to the nearest chair)
b) In one sentence explain what the AP of 4 workers being 35 tells us.
c) In one sentence explain what your answer for MP of the 4th worker tells us.
d) Given the fact that each chair produced in our factory can be sold at the market price of $10 per chair, fill in the MRP column (round to the nearest dollar).
e) In one sentence explain what your answer for MRP for the 4th worker tells us.
f) If the market wage for workers doing manufacturing work (such as chair production) is $180 per day, determine the amount of workers this firm should hire to maximize its profit.
Explain your answer using MRP.
Workers
Total Product
(TP)
Average Product
(AP)
Marginal Product (MP)
Marginal Revenue Product
(MRP)
0
0
-
-
-
1
10
2
15
3
40
4
35
5
190
6
30
7
240
8
250
9
5
Explanation / Answer
a)
b) AP at 4 units being 35 tells us that if Tp is distriuted equally amongst all workers then each worker on an average produced 35 units.
c) MP of 4th unit tell us that number of workers hired increased from 3 units ot 4 units, Tp increased by 70 units.
d) It is already done in above table.
e) MRP tell us addition in total revenue when one additional worker is hired. It is equal to MP*MR Since Price is constant. It is equal to MP*AR i.e. Price
f) If wage rate is $180 then it should hire number of workers so that MRP = 180. It is happening when firm hires 7 workers because thereafter MRP falls to 100. If 8th worker is hired, his constribution to TP will be 100 while firm willl require ot pay him 180 which means loss. Therefore, firm must stop hiring workers when MRP falls below wage rate of workers.
Workers TP AP MP MRP 0 0 - - 0 1 10 10 10 100 2 30 15 20 200 3 70 27 40 400 4 140 35 70 700 5 190 38 50 500 6 220 38 30 300 7 240 34 20 200 8 250 31 10 100 9 255 28 5 50Related Questions
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