A company operates in a perfectly competitive market, selling each unit of output for a price of $20 and paying the market wage of $360 per day for each worker it hires. In the following table, complete the column for the marginal revenue product of labor (MRP) at each quantity of workers.

Labor Output Marginal Product of Labor Marginal Revenue Product of Labor
(Number of workers) (Units of output) (Units of output) (Dollars)
0 0 - -
1 20 20
2 39 19
3 57 18
4 72 15
5 84 12

The marginal revenue product of labor (MRPL) is an additional amount of revenue that a firm will make when it hires one additional employee. The formula and r calculating

MRPL = marginal product of labour x marginal revenue.

It should be noted that P = MC = MR. Therefore marginal revenue will be $20.

Therefore when:

MPPL = 0

MRPL = 0 × 20 = 0

MPPL = 20

MRPL = 20 ×20 = 400

MPPL = 19

MRPL = 19 × 20 = 380

MPPL = 18

MRPL = 18 × 20 = 360

MPPL = 15

MRPL = 15 × 20 = 300

MPPL = 12

MRPL = 12 × 20 = 240

Check the attached file for the table.

anthougo anthougo · Answer 2 · 2021-12-07T16:52:30+01:00

The completion of the column for the marginal revenue product of labor (MRP) is as follows:

Labor (Number of Output Marginal Product of Value of the

workers) (Units of output) Labor (Units of output) Marginal Product

of Labor (Dollars)

1 20 20 $400 (20 x $20)

2 39 19 $380 (19 x $20)

3 57 18 $360 (18 x $20)

4 72 15 $300 (15 x $20)

5 84 12 $240 (12 x $20)

The marginal revenue product of labor (MRPL) shows the additional amount of revenue the firm generates when it adds one additional employee to its labor force. It is the product from the multiplication of the marginal product of labor by the selling price of output.

Thus, according to the law of Marginal Revenue Product of Labor, the company will demand more labor until its MRPL equals the wage rate, that is at $360.

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