Question #83403

1. Acme Widget, Inc. has the following production function:

Number of Workers Number of Widgets Produced

1 8

2 15

3 21

4 26

5 30

6 33

Acme can get $5 for each widget it produces. How many workers will it hire if the

nominal wage is $38? If it is $27? If it is $22?

2. The marginal product of labour for a certain firm is MPN = 50 â€“ N, where N is the

number of labour hours used in production. The price of output is $2 per unit,

a) If the nominal wage is $10/hour, how many hours of labour will be demanded by

the firm?

b) If the nominal wage is increased to $12/hour, how many hours of labour will be

demanded by the firm?

c) What is the wage elasticity of labour demand for this wage change? (Use the

midpoint formula to calculate the arc elasticity.)

Number of Workers Number of Widgets Produced

1 8

2 15

3 21

4 26

5 30

6 33

Acme can get $5 for each widget it produces. How many workers will it hire if the

nominal wage is $38? If it is $27? If it is $22?

2. The marginal product of labour for a certain firm is MPN = 50 â€“ N, where N is the

number of labour hours used in production. The price of output is $2 per unit,

a) If the nominal wage is $10/hour, how many hours of labour will be demanded by

the firm?

b) If the nominal wage is increased to $12/hour, how many hours of labour will be

demanded by the firm?

c) What is the wage elasticity of labour demand for this wage change? (Use the

midpoint formula to calculate the arc elasticity.)

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