Temple University

Department of Economics

Demand for Inputs in Imperfectly Competitive Markets

Name Key

Natalie Dresst has hired an intern to work in her clothing factory on 7th Avenue in New York City. Tulle Tailor has carefully studied the annual reports, the firm's hiring history, and production statistics and has come up with the following set of tables: The demand schedule

Price Quantity Total Revenue Marginal Revenue
75 0 0 --
62.50 25 1562.5 62.5
52.50 45 2362.5 40
45 60 2700 22.5
40 70 2800 10
37.5 75 2812.5 2.5

 The production schedule

Labor Output Marginal Product Marginal Revenue Product
0 0 -- --
1 25 25 1562.5
2 45 20 800
3 60 15 337.5
4 70 10 100
5 75 5 12.5

The local labor supply schedule

Wage Supply of Labor Firm's Total Labor Cost Marginal Factor Cost
(Marginal Input Cost)
30 0 0 --
40 1 40 40
50 2 100 60
60 3 180 80
70 4 280 100
80 5 400 120

Unfortunately, Tulle has had to go back to school before finishing the project.  Your management consulting firm, Murky Research, has been hired to finish the project, the object of which is to determine the profit maximizing level of employment.

1. Fill in the blanks in the tables.

2. How many workers should be hired? 4

3. What wage should be paid? 70

4. What is the value to the firm of the last worker hired?

5. Is Natalie able to exploit her workers?  Yes  No