A competitive, profit-maximizing firm hires workers up to the point where the value of the marginal product of labor is equal to the wage. 7. Because the firm chooses the quantity of labor at which the value of the marginal product equals the wage, the value-of-marginal-product curve is the firm’s labor demand curve.
How do you calculate the marginal product of labor?
When production is discrete, we can define the marginal product of labor as ΔY/ΔL where Y is output. If a factory that is initially producing 100 widgets hires another employee and is then able to produce 106 widgets, the MPL is simply six.
When does an increase in marginal factor induce a firm to hire fewer workers?
An increase in the marginal factor cost will induce a firm to hire fewer workers If the additional revenue from hiring an additional worker equals the additional costs from hiring the extra worker, then we know that MFC/VMP=I The demand for labor is derived from the demand for the final product of the firm
How to calculate marginal labor cost for monopsonists?
Figure 18.1 shows the supply of labor and the marginal labor cost for a monopsonist. When the monopsonist hires 10 workers, the marginal labor cost of hiring the 10th worker is _____ while the wage paid to each of the 10 workers is _____. Refer to Table 17.1.
What happens to marginal revenue product of Labor?
The additional revenue obtained by a firm when it hires an additional worker, holding other inputs constant, is the marginal revenue product of labor The marginal revenue product of labor declines as the number of workers increases because of the law of diminishing marginal returns Refer to the table above.
How does hiring a new worker increase total revenue?
A software firm decides to hire a new worker for its production plant. An additional worker is likely to increase the quantity of output produced, which will increase the firm’s total revenue by $1,000. The firm should pay the worker _____.
