The list on the right shows how much corn each man adds to the out of corn a far
ID: 1215094 • Letter: T
Question
The list on the right shows how much corn each man adds to the out of corn a farm can produce using various different amounts of labor and one acre of land. This firm can sell the corn for $30 per bushel. They pay $10 for the one acre of land. The wage is $60 per worker.
[#L] [M.P.L]
1 20
2 50
3 10
4 5
5 2
6 1
1. if this firm hires 3 workers, it will have a TOTAL PRODUCT =
2. if this firm hires 3 workers, it will have TOTAL REVENUE =
3. How many workers should they hire to maximize profits ?
4. If this firm does hire the number of workers you answered for question (8), exactly how much profits will they make ?..... $....
5. if all the workers have the same level of skill, why does the 2nd worker have a LARGER Marginal product than the 1st worker?
Explanation / Answer
a. When 3 labours are hired-Total product=20+50+30=100 units.
b. Total revenue=Price*quantity
=30*100
=$3000
c. To maximise profit
wage=Marginal value product of the worker
=2*30
=60
which is equal to wage of $60. Hence, 5 workers should be hired.
d. Profit=total revenue-total cost
total product=(100+5+2)=107
price=$30
Total revenue=107*30=3210
Total cost=10+60*5=310
profit=3210-310
=$2900
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