For the production schedule of a perfectly competitive firm given below, answer the following: Units of Labor Total Output Units of Labor Total Output 1 7 4 19 2 12 5 21 3 16 6 22
a) If the price of output is $50 per unit, find the specific values for the Marginal Revenue Product and the quantity of labor the firm hires if the market wage is $75
b) If the price of the firm's output changes to $30, explain how this changes the results in (a). Is it possible that this price change would lead to lower market wages? What would this tell you about the firms that make up the market demand for this type of labor?
c) An increase in the price of capital causes this firm to hire less labor. Explain how this information allows you to determine whether the factor substitution effect or the output effect is larger.