1. Marginal revenue product is defined as the change in total revenue that results from the employment of an additional unit of a resource. A widget producer wishes to determine how the addition of pounds of rubber will affect its MRP and profits. See the table below, and answer each of the questions. (40pts/10pts each)
|
Pounds of rubber
(quantity of resource)
|
Number of widgets
(total product)
|
Price
of widgets ($)
|
|
0
1
2
3
4
5
|
0
20
35
45
50
53
|
-
12
10
8
6
4
|
a. The marginal product of the 3rd pound of rubber is _______________.
b. The marginal revenue product of the 3rd pound of rubber is ________.
c. The price of rubber is $110 per pound. To maximize profit, the widget producer should produce _______________.
d. The price of rubber is $110 per pound. To maximize profit, the widget producer should buy and use:
2. See the table below, and answer each of the questions.
a.If the market represented in exhibit above is allowed to operate freely, total employment in the market will be __________________.
b.If a union raises the wage to $4, total employment in the market will be _______.
c.The approximate total surplus of labor after the union wage is _______________.
d. If the market is allowed to operate freely, total employment by the typical employer (illustrated in the right-hand panel) will be ________________.
e. If a union raises the market wage to $4, total employment by the firm (in the right-hand panel) will be ________________.