Orange Inc. sells cell phones in a perfectly competitive market in the short-run. Capital and labor are
Question:
Orange Inc. sells cell phones in a perfectly competitive market in the short-run. Capital and labor are two resource factors used to produce the cell phones. Capital is fixed in the short-run but labor can vary. The market for hiring labor is a perfectly competitive market.
Labor is measured in worker weeks. Each worker week costs $600 of wages and Orange Inc. can hire any number of worker weeks. Each cell phone is sold at a price of $200 and can sell any number of phones that are produced. Information is given below on various amounts of labor and output.
Quantity | Output | Marginal Product of Labor | Total Revenue | Marginal Revenue | Marginal Revenue Product | Total Variable Cost | Marginal Cost | Marginal Resource Cost |
0 | 0 | - | - | - | - | - | - | - |
1 | 6 | 6 | 1200 | 200 | 1200 | 600 | 100 | 600 |
2 | 11 | 5 | 2200 | 200 | 1000 | 1200 | 120 | 600 |
3 | 15 | 4 | 3000 | 200 | 800 | 1800 | 150 | 600 |
4 | 18 | 3 | 3600 | 200 | 600 | 2400 | 200 | 600 |
5 | 20 | 2 | 4000 | 200 | 400 | 3000 | 300 | 600 |
6 | 21 | 1 | 4200 | 200 | 200 | 3600 | 600 | 600 |
Using the table you created in Step 2, create a graph that illustrates the profit maximizing level of input price and input quantity for the company using marginal analysis.
The graph can be computer-generated or created by hand. Indicate the profit maximizing input quantity and input price in this graph.