Problem: Consider the following information for a T-shirt manufacturing firm that can sell as many T-shirts as it wants for $3 per shirt:
|
Number of workers
|
Number of shirts produced per day
|
MP(L)
|
TR
|
MRP(L)
|
|
0
|
0
|
|
|
|
|
1
|
30
|
|
|
|
|
2
|
80
|
|
|
|
|
3
|
110
|
|
|
|
|
4
|
135
|
|
|
|
|
5
|
|
20
|
|
|
|
6
|
170
|
|
|
|
|
7
|
|
|
|
30
|
|
8
|
|
|
|
15
|
a) Fill in all the blanks in the table.
b) Verify that MRP(L) for this firm can be calculated in two ways: (1) change in TR from adding another worker and (2) MP(L) times the price of output.
c) If this firm must pay a wage rate of $40 per worker per day, how many workers should it hire? Briefly explain why.
d) Suppose the wage rate rises to $50 per worker. How many workers should be hired now? Why.
e) Suppose the firm adopts a new technology that doubles output at each level of employment and that the price of the shirt remains at $3. What is the effect of this new technology on MP(L), and on MRP(L)?