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Chapter 28: Q. a - For Critical Thinking (page 629)

Did the decline in the global price of oil reduce marginal revenue product by reducing marginal revenue from the sale of oil or the marginal product of labor provided by oil workers? Explain.

Short Answer

Expert verified

The additional revenue generated by using one more unit of resource is referred to as the marginal revenue product. Each firm reduces its output by moving down its marginal cost curve.

Step by step solution

01

Introduction.

The increased income engendered with using another one unit of resource is referred to as the marginal revenue product.

MRP is used to make critical business production decisions and determine the optimal level of a resource.

02

Marginal product of Labor.

The products subject of laborer's is determined by dividing in outcome by the transformation in labour, everything else being equal.

03

Explanation.

Market prices of goods fall when demand falls, and quantity falls when demand rises. When the price equals the marginal revenue, a decrease in the price equals a decrease in the marginal revenue.

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Most popular questions from this chapter

Since the beginning of this century, there has been a significant increase in the price of corn-based ethanol.

a. A key input in the production of com-based ethanol is com. Use an appropriate diagram to explain what has likely occurred in the market for corn if the supply curve has not shifted.

b. In light of your answer to part (a), explain why many hog farmers, who in the past used corn as the main feed input in hog production, have switched to cookies, licorice, cheese curls, candy bars, and other human snack foods instead of corn as food for their hogs.

Recently, there has been an increase in the market demand for products of firms in manufacturing industries. The production of many of these products requires the skills of welders. Because welding is a dirty and dangerous job compared with other occupations, in recent years fewer people have sought employment as welders. Draw a diagram of the market for the labor of welders. Use this diagram to explain the likely implications of these recent trends for the market clearing wage earned by welders and the equilibrium quantity of welding services hired.

Consider Figure 28-7. Suppose that the monopolist is contemplating hiring 14 units of labor, which it knows would cause the marginal product to decline to 150 units of output per unit of labor. The product price also decreases to \(4.50 per unit, and the firm's marginal revenue declines to \)3.20 per unit. What would be the firm's marginal revenue product if it hires a 14th unit of labor?

Recently, Swedish companies have outsourced manufacturing labor previously performed by Swedish workers at \(20 per hour to U.S. workers who receive a wage rate of \)10 per hour. Evaluate the effects of Swedish manufacturing-labor outsourcing on Swedish and U.S. employment levels and wages.

Why do you suppose that a growing number of fast-food restaurant companies are experimenting with automatic cooking equipment?
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