FIRM'S DEMAND FOR A RESOURCE: Use the following data to answer the questions below. Assume a perfectly competitive product market.
Units of Labor Units of Output
0 0
1 7
2 13
3 18
4 22
5 25
a. Calculate the marginal revenue product for each additional unit of labor if output sells for $3 per unit.
b. Draw the demand curve for labor based on the above data and the $3 per unit product price.
c. If the wage rate is $15 per hour, how much labor will be hired.
d. Using your answer to part ( c ), compare the firm's total revenue to the total amount paid for labor. Who gets the difference?
e. What would happen to your answers to parts ( b ) and ( c ) if the price of output increased to $5 per unit, other things constant?