Question

Sonny's Surfer Shop produces and sells custom surf boards. Assume that labor is the only input that varies for the firm. The firm's owner has determined that if she hires 10 workers, the firm can produce 10 surf boards per day. If she hires 11 workers, the firm can produce 12 surfboards per day. The firm sells each surfboard for $2,000 . and it pays each of its workers $200 per day. Which of the following is correct?a. For the 11th worker, the value of the marginal product of labor is $400.b. For the 11th worker, the value of the marginal product of labor is $4,000.c. The firm should not hire the 11th worker since hiring this worker reduces profit.d. In order to justify hiring the 11th worker the firm will need to raise the price of a surfboard.

Answer 1

Answer:

B) For the 11th worker, the value of the marginal product of labor is $4,000.

Explanation:

The marginal product of labor (MPL) of a company is the total change in output achieved by hiring an additional worker. To calculate the MPL we have to multiply the change in output (measured in units) times the revenue generated by every extra unit of output.

In this case, the MPL = 2 surfboards x $2,000 per surfboard = $4,000