Reasons for Declining Marginal Product of Labor
Question
a) What do economists mean by “declining marginal product of labor?” Why do we typically assume that the marginal product of labor declines? (Extra credit: Can you think of any situations where marginal product might be constant or increasing? Defend your answer.)
b) Fill in the following table:
|
# workers |
total product per day |
marginal product |
marginal revenue product (output sells at $6) |
marginal revenue product (output sells at $8) |
|
0 |
0 |
|
|
|
|
1 |
50 |
|
|
|
|
2 |
90 |
|
|
|
|
3 |
120 |
|
|
|
|
4 |
140 |
|
|
|
c) Draw the labor demand curve(s). If the daily wage is $240, how many workers will the firm hire if output sells for $6? How many workers will the firm hire if instead output sells for $8?
Summary
This question belongs to economics and discusses about declining marginal product of labor.
Total word count: 260