CalculatingMRPsForPerfectCompetition.doc - Ishan Chadha...

This preview shows page 1 - 2 out of 2 pages.

Ishan Chadha Calculating MRPs for Perfect and Imperfect Competition 1. Suppose Firm A sells its output in a perfectly competitive market at a price of $10 per unit. The firm also hires its labor in a perfectly competitive market at a wage rate of $200 per laborer. Complete the table for MPL 1 and MRP 1 . # of Laborers Total Product MPL 1 MRP 1 MRP 2 1 20 20 $200 $150 2 60 40 $400 $300 3 95 35 $350 $262.50 4 128 33 $330 $247.50 5 153 25 $250 $187.50 6 168 15 $150 $112.50 7 173 5 $50 $37.50 8 170 -3 -$30 -$22.50 a.
b. 5
c. Suppose, due to a lack of popularity, the price of the good drops to $7.50 per unit. Calculate the new values for marginal revenue product for the MRP 2 column. In table d. Given the change in Part C, how many laborers will the firm hire at a wage rate of $200 per day? Explain how the change in labor demand reflects the concept of derived demand.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture