Problem:
Given a firm's production function as Q = 5 L1/2 - 0.1L and its average revenue function as AR = 768 - 3Q, determine the marginal productivity of labor, MPL and the value of L for which it will be zero. Does the production function exhibit the property of diminishing marginal productivity of labor? Determine the marginal revenue productivity of labor, MRPL. If the firm employs 100 people, what is the value of marginal revenue, MPL and MRPL. Comment upon whether it would seem worthwhile for the firm to increase its labor force.
The marginal revenue of productivity of labor is the change in total revenue produced by a change in labour.