effect of this new technology
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Consider the following information for a T-shirt manufacturing firm that can sell as many T-shirts as it wants for $3 per shirt:
Number of workers Number of shirts produced per day MP(L) TR MRP(L)
0 0
1 30
2 80
3 110
4 135
5 20
6 170
7 30
8 15
a) Fill in all the blanks in the table.
b) Verify that MRP(L) for this firm can be calculated in two ways: (1) change in TR from adding another worker and (2) MP(L) times the price of output.
c) If this firm must pay a wage rate of $40 per worker per day, how many workers should it hire? Briefly explain why.
d) Suppose the wage rate rises to $50 per worker. How many workers should be hired now? Why.
e) Suppose the firm adopts a new technology that doubles output at each level of employment and that the price of the shirt remains at $3. What is the effect of this new technology on MP(L), and on MRP(L)?
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Solution Summary
What is the effect of this new technology on MP(L), and on MRP(L)?
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