Suppose you manage a firm with two production plants. The marginal product of labor at plant 1 is MP1 = 1400 - L1 where L1 is the number of workers employed in plant 1. The marginal product of labor at plant 2 is MP2 = 2000 - L2 where L2 is the number of workers employed in plant 2. Given that you have 1,000 workers, what is the best allocation of workers between the two plants?
What will be an ideal response?
First, write the marginal product of labor in plant to as a function of the number of workers in plant 1:
Now equate the marginal products for each plant:
1400 - L1 = 1000 + L1
400 = 2L1
200 = L1
So 200 workers should be assigned to plant 1 and 800 workers should be assigned to plant 2.
You might also like to view...
Firms disclose financial statements in ________ and in ________
A) periodic filings to the federal government; annual reports to shareholders B) daily filings to the federal government; daily reports to shareholders C) monthly reports to shareholders; 5-year balance statements to the board of directors D) weekly filings with the SEC; monthly reports to the Fed
Which would be one of the factors that increase aggregate demand?
a. An increase in the productivity of labor b. An increase in personal income tax rates c. An increase in consumer wealth d. An increase in real interest rates