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PROBLEM SET 10

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

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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? ____________________________________________________________________ _ ____________________________________________________________________ _ 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. ____________________________________________________________________ _ ____________________________________________________________________ _ 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 > >

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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.
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