Description

Micro Economics

Homework #8

Due:  Tuesday May 5

Marginal Revenue Product

The Demand function is Qd = 1,000 – 20*P

The Supply function is Qs = 400 + 10*P

L        Qd     Peq   TRc    MRc            Pm    TRm  MRPm

0              0

10           200

20           360

30           480

40           560

50           600

Use the relationship between Labor and Output to answer complete the chart and answer the following questions:

I.    In a competitive market:

a)   calculate the equilibrium price of the product using the supply and demand functions

b)   create the “ Total Revenue” and “Marginal Revenue Product” columns

c)   Estimate the number of laborers hired when the wage rate is $200

II.      Now consider the behavior of a monopolist. 

a)   calculate the price at each level of output (Q) by using (only) the demand function

b)  create the “ Total Revenue” and “Marginal Revenue Product” columns 

c)  Estimate the number of laborers hired by the monopolist when the wage rate is $200