Question: Marginal Product. The table below describes the key elements in deriving a labor demand curve for a bakery. Complete the table and answer the following

Marginal Product. The table below describes the key elements in deriving a labor demand curve for a bakery. Complete the table and answer the following questions. The number of workers is labor (L). Capital (K) is fixed at I unit.

a. At what employment level does the firm encounter diminishing marginal returns?
b. Draw a graph of the MP of labor column. Plot the number of workers on the horizontal axis and dollars on the vertical axis. What does this curve represent?
c. How many workers will the bakery hire if the nominal wage rate is $8?
d. Suppose the price of bread increased to S2 per loaf. How many workers will the bakery hire if the nominal wage rate is SS?

Number of MP of Workers Loaves Baked Labor Number of Price Nominal Real Px MPWage Rate Wage Rate (W/P) r hour S8 S8 S1 S1 S1 SI $20 36 48 56 60 S1 S1

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No of workers Loaves baked MP Price PMP Nominal wage Real wage 0 0 1 8 8 1 20 20 1 20 8 8 2 36 ... View full answer

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