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    Labor and output table and optimal choice of production

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    The table below shows a competitive firm's short run production function. labor is the firms only variable input, and market price for the firms product is $2 per unit
    units of labor units of output
    3 370
    4 490
    5 570
    6 600
    7 620

    1. how much does the 5th unit of labor add to the firms total revenue?

    2. if the wage rate is $200, how many units of labor will the firm employ?

    3. if the wage rate is $200,the firm should..........?

    4. if market price for the firms product increases to $5 how many units of labor will the firm employ at the wage rate of $200?

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    Solution Preview

    1. the 5th unit of labour adds a quantity of 570-490 = 80 unit at $2 = $160 increase in Total Revenue

    2. An extra unit of labor ...

    Solution Summary

    A labor and output table are provided (ie. the amount of output at different labor amounts) by the question. The answer discusses optimal solutions given this information for this competitive firm.