Using the chart below, answer the following: 1. The marginal product of the 3rd
ID: 1245195 • Letter: U
Question
Using the chart below, answer the following:1. The marginal product of the 3rd pound of rubber is ____?
2. The marginal revenue product of the 3rd pound of rubber is _____?
3. The price of rubber is $110 per pound. To maximize profit, the widget producer shoud produce ______.
4. The price of rubber is $110 per pound. To maximize profit, the widget producer shoud buy and use _______.
__________________________________________________________________________
Pounds of Rubber Number of Widgets Price of Widgets
(quantity of resource) (total product) ($)
___________________________________________________________________________ 0 0 - 1 20 12 2 35 10 3 45 8 4 50 6 5 53 4
Using the chart below, answer the following:
1. The marginal product of the 3rd pound of rubber is ____?
2. The marginal revenue product of the 3rd pound of rubber is _____?
3. The price of rubber is $110 per pound. To maximize profit, the widget producer shoud produce ______.
4. The price of rubber is $110 per pound. To maximize profit, the widget producer shoud buy and use _______.
__________________________________________________________________________
Pounds of Rubber Number of Widgets Price of Widgets
(quantity of resource) (total product) ($)
___________________________________________________________________________ 0 0 - 1 20 12 2 35 10 3 45 8 4 50 6 5 53 4
Explanation / Answer
Well, first of all, the marginal product of the 3rd pound of rubber is the additional amount of product that the 3rd pound of rubber brings. This means we want to find the difference between the product of 2 pounds of rubber and 3 pounds of rubber. At two pounds, we see that the product is 35. At three pounds, it's at 45. Thus, the marginal product of the 3rd pound of rubber is 10 (45-35). The marginal revenue of the 3rd pound of rubber is the additional revenue that is gotten from using the 3rd pound of rubber. Revenue is the quantity multiplied by the price, which in the case of the 2 pounds of rubber, you can make 35 that can be sold at $10. Thus, the total revenue for the 2nd pound of rubber is 35 times 10, which is $350. Using 3 pounds of rubber, you can make 45 widgets that can be sold at $8, so the revenue is 45 times 8, which is $360. Thus, the marginal revenue of the 3rd pound of rubber is simply the difference between the revenue of 2 pounds of rubber and 3 pounds of rubber, which is $360-$350, which is $10. To maximize profit, the producer should produce at the quantity where marginal cost equals marginal revenue. The marginal cost here is a fixed $110, because each pound of rubber will cost $110. So, we want to find the place where marginal revenue is also $110. We remember from above that we calculate the marginal revenue by first finding total revenue and then finding the difference between the current pound of rubber's revenue and the previous pound's revenue. In this case, we see that if we use one pound of rubber, we get a total revenue of $240 (20 times 12). At two pounds of rubber, we have a total revenue of $350. This is a difference of $110, and thus we see that at the 2nd pound of rubber, marginal cost ($110) equals marginal revenue (also $110 because $350-$240=$110). Thus, to maximize profit, the widget producer should produce 35 widgets. Part 4 is a different side of the coin than question 3 but asking the same thing. We already know that the widget producer should produce 35 widgets to maximize profit. How much rubber should he buy? We see that to produce 35 widgets, you need 2 pounds of rubber. So, he should buy and use 2 pounds of rubber.
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