Suppose that, at your firm, the relationship between output produced and the number of workers you hire is as follows:
Labor Total Product
0 ………………………………….. 0
1 …………………………………..12
2 …………………………………..23
3 …………………………………..32
4 …………………………………..38
5 …………………………………..42
6 …………………………………..45
a. Find the marginal product of labor for each worker.
b. Is the relationship between output and labor consistent with the Law of Diminishing Returns?
c. Suppose your firm is a perfect competitor in the output market and the labor market. If the price of output is $9 and the wage rate is $27, how many workers should your firm hire?
d. If the price of output falls to $3 and the wage remains $27, how many workers should your firm hire?