Written Assignment 4

Written Assignment 4 - Written Assignment 4/Principles of...

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Written Assignment 4/Principles of Microeconomics – N. Gregory Mankiw- Fifth Edition – ISBN 0324-58998- 0) Written Assignment 4 Answer all of the following questions. Title your assignment "Written Assignment 3," unless your mentor directs otherwise. This assignment covers text chapters 15 through 22. 1. Labor is the only input used by a perfectly competitive firm. It hires workers for $50 a day. The firm's production function is as shown in the following Table. Each unit of output sells for $10. a. Complete the table to show the marginal product of labor and the value of the marginal product of labor. b. How many days of labor should the firm hire? Explain. The firm should hire no more than four days of labor because on the fifth day of labor, the firm earns a loss in profit of $20.00. The fifth day yields a marginal product of labor of only $30.00 hence paying a wage of $50.00 will end with a marginal profit of -$20.00. correct Days of Labor Units of Daily Output Marginal Product of Labor Value of the Marginal Product of Labor 0 0 1 7 7 * 10 70 2 13 6 * 10 60 3 19 6 * 10 60 4 25 6 * 10 60 5 28 3 * 10 30 6 29 1 * 10 10 2. Describe the factors of production. What are the returns to these factors (their price)? Describe the marginal products of each factor and how the value of the marginal product of each factor is determined. . Factors of production are the resources used to produce a good or service like “land, labor, and capital” (Mankiw, 5 th Ed. Pg 392.), just to name a few. Factors of production allow or facilitate the production of goods or services however they are not part of the final product like a piece of metal for an example. Labor is the human mental and or physical exertion into the production of a product whereas a certain wage is paid for this effort. Land is everything in the world that is not created by a human. This includes the air, sunlight, trees, water and minerals. Capital is the physical products that are produced by the labor that is exerted during the production of the goods and services. The price/return of labor is the wages that are paid to the workers who exert the energy to produce the goods and service. The price of land is the amount paid to rent or buy the office space
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Written Assignment 4/Principles of Microeconomics – N. Gregory Mankiw- Fifth Edition – ISBN 0324-58998- 0) or building used in the production or sale of the product or service. Lastly, capital price is the money spent on the desks, chairs and other equipment needed in the production of the final product. All three earn their marginal contribution to the production process. The marginal product of labor is determined by the amount total output that will be produced by increasing the amount of workers. A firm will base its decision to hire additional units of labor using the marginal decision making rule that is, if the extra output that is produced by hiring one more unit of labor adds more to total revenue than it adds to total cost, the firm will increase profit by increasing its use of labor. Therefore, it is profitable
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This note was uploaded on 04/07/2012 for the course ACCT 201 taught by Professor Evans during the Spring '11 term at Thomas Edison State.

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Written Assignment 4 - Written Assignment 4/Principles of...

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