The following table shows the total physical product of labor. Compute the marginal physical product (MPP) of labor and the marginal revenue product (MRP) of labor at output prices of $10 per unit and $12 per unit. If labor costs $105 per unit, how much should the firm hire at each price of output?
Total Physical
MPP of Labor
MRP at a
Price of $10
MRP at a
Price of $12
LaborProduct
of Labor
110_______________222_______________335_______________447_______________558_______________668_______________777_______________885_______________?
What will be an ideal response?
If labor costs $105 per unit, the firm should hire 5 units of labor if the price of output is $10 and 7 units of labor if the price of output is $12.
| Total Physical | MRP at a | MRP at a | ? | Product |
| MPP of Labor | Price of $10 | Price of $12 | Labor | of Labor |
| 1 | 10 | 10 | 100 | 120 |
| 2 | 22 | 12 | 120 | 144 |
| 3 | 35 | 13 | 130 | 156 |
| 4 | 47 | 12 | 120 | 144 |
| 5 | 58 | 11 | 110 | 132 |
| 6 | 68 | 10 | 100 | 120 |
| 7 | 77 | 9 | 90 | 108 |
| 8 | 85 | 8 | 80 | 96 |
Economics
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