PROBLEM SET 10 - PROBLEM SET 10 Labor Demand and Supply...

PROBLEM SET 10
Labor Demand and Supply
Department of Economics Professor William J. Stull
Temple University Economics 1902
A. Picking Peppers
The market for peppers is perfectly competitive. Peter Piper, a pepper farmer,
hires pickers during the harvest. The market for pepper pickers is also perfectly
competitive. The first two columns of Figure A give Piper's total product of labor
schedule for these workers. Column 1 gives the number of pickers hired per day (L).
Column 2 gives the number of pecks of peppers picked (Q).
1. Compute Piper's marginal product of labor (MP
L
) schedule by filling in column 3.
2. Peppers sell for $10 per peck. Fill in column 4. Why are all the entries the same?
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3. Compute Piper's value of total product schedule (VTP
L
) by filling in column 5.
4. Compute Piper's value of marginal product schedule (VMP
L
) by filling in
column 6.
5. Give a one sentence economic interpretation of the third number in column 5.
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6. Give a one sentence economic interpretation of the last number in column 6.
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Figure A
(1) (2) (3) (4) (5) (6)
Number of
Pepper
Pickers
(L
)
Pecks of
Peppers
Picked
(Q
)
Marginal
Product of
Labor
(MP
L
)
Pepper
Price
(P)
Value of the
Total
Product of
Labor
(VTP
L
)
Value of the
Marginal
Product of
Labor
(VMP
L
)
--------------- --------------- --------------- --------------- --------------- ---------------
0 0
> >
> >
1 15 > >
> >
2 36
> >
> >
3 56
> >
> >
4 72
> >
> >
5 82
> >
> >
6 84
> >

7. Draw Piper's value of marginal product curve by plotting VMP
L
against L in Figure
B. Remember to locate each VMP value at the midpoint between the two relevant
labor quantities. NOTE: It will not be exactly like the one drawn in class.