1. Marginal revenue product is defined as the change in total revenue that resul
ID: 1249866 • Letter: 1
Question
1. Marginal revenue product is defined as the change in total revenue that results from the employment of an additional unit of a resource. A widget producer wishes to determine how the addition of pounds of rubber will affect its MRP and profits. See the table below, and answer each of the questions. (40pts/10pts each)Pounds of rubber
(quantity of resource)
0
1
2
3
4
5
Number of widgets
(total product)
0
20
35
45
50
53
Price
of widgets ($)
-
12
10
8
6
4
a. The marginal product of the 3rd pound of rubber is _______________.
b. The marginal revenue product of the 3rd pound of rubber is ________.
c. The price of rubber is $110 per pound. To maximize profit, the widget producer should produce
__________________.
d. The price of rubber is $110 per pound. To maximize profit, the widget producer should buy and use:
__________________.
Explanation / Answer
We wil use this information below to answer the questions MC MR 0 0 - 0 0 1 20 12 240 240 2 35 10 350 110 3 45 8 360 10 4 50 6 300 -60 5 53 4 212 -88 a. The marginal product of the 3rd pound of rubber is __45-35=10_____________. b. The marginal revenue product of the 3rd pound of rubber is (45*8)-(35*10)=10____. c. The price of rubber is $110 per pound. To maximize profit, the widget producer should produce_____35_____________. d. The price of rubber is $110 per pound. To maximize profit, the widget producer should buy and use: __2 pounds produce 35_____________ Hope this helps
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