demand table: led zep

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Demand Table: Led Zep. I think per average income per capita in the U.S. is in the range. 1)Less than \$20,0009) \$55,000-\$60,000 2) \$20,000-25,00010) more than \$60,000 3) \$25,000-30,000 4) \$30,000-35,000 5) \$35,000-40,000 6)\$ 40,000-45,000 7) \$45,000-50,000 - PowerPoint PPT Presentation

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• Demand Table: Led Zep

• I think per average income per capita in the U.S. is in the range1)Less than \$20,0009) \$55,000-\$60,0002) \$20,000-25,00010) more than \$60,0003) \$25,000-30,000 4) \$30,000-35,000 5) \$35,000-40,000 6)\$ 40,000-45,000 7) \$45,000-50,000 8) \$50,000-\$55,000

• I think per average income per capita in the U.S. is in the range1)Less than \$20,0009) \$55,000-\$60,0002) \$20,000-25,00010) more than \$60,0003) \$25,000-30,000 4) \$30,000-35,000 5) \$35,000-40,000 6)\$ 40,000-45,000 7) \$45,000-50,000 8) \$50,000-\$55,000

• Correct answerU.S. Per capita income in 2006 was about \$43,000.

• If the average value product of labor is greater than the wage, a firm can increase its profits by hiring more labor.TrueFalse

• With 4 workers, Avg Val Product is \$90.That exceeds the wage. Will profits increase from hiring a fourth worker? No. See table. Example: Wage is \$25

workersv.outputAVPProfits1\$200\$200\$1752\$300\$150\$2503\$350\$116.66\$2754\$360\$90\$260

• A profit maximizing firm will choose the amount of labor that maximizes the marginal value product of labor.TrueFalse

• To maximize Marginal Value Product hire 1To maximize profits, hire 3.What does Marginal value product rule say?Hire additional labor so long as marginal value product exceeds the wage. Example: Wage is \$25

workersv.outputMVPProfits1\$200\$200\$1752\$300\$100\$2503\$350\$50\$2754\$360\$10\$260

• If this firm maximizes profitsby hiring 3 workers, the wage must be between: \$40 and \$60\$85 and \$120\$60 and \$100\$60 and \$80\$100 and \$113.33

Number workers.Value of output.1\$2002\$2403\$3004\$3405\$350

• Why is this?According to the marginal profit rule,Firm should add workers so long as marginal value product of labor exceeds wage. Marginal value product of third laborer is \$60, marginal value product of 4th is \$40. If wage is between \$40 and \$60, it pays to add third laborer, but not a 4th.

• And on to our lecture

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