Temple University
Department of Economics

Economics 52
Competition in the Goods Market and Competition in the Labor Market

 

Name Key

Angie O'Plasty has a firm that makes pacemakers.  She is able to sell all of the pacemakers that she wants at a price of $10 apiece. She is also able to hire all of the workers that she wants at a wage of $30 per day.  Her accountants have determined that the relationship between labor input per day and quantity of pacemakers produced is given in the following table:

Units of labor per day

Output

Marginal Product

Value of the marginal product
(aka Marginal revenue product)

0

0

--

 

1

11

11

110

2

20

9

90

3

27

7

70

4

32

5

50

5

35

3

30

6

36

1

10

1. Fill in the blanks.

2. What quantity of labor should Angie hire? Wage = VMP at L = 5

3. If the competitive wage rises to $50, what quantity of labor should Angie hire? Wage = VMP at L=4

4. If the competitive wage is $60 and the price of Angie's product rises to $20, what quantity of labor should Angie hire? Wage = VMP at L=5