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Satsume Satsume
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5 years ago
Trisha's Fashion Boutique production function for dresses is y(K, L) = K1/2L1/3, where K is the number of sewing machines and L is the amount of labor hours employed.  Trisha pays $15 per labor hour and sells each dress for $87.50.  Also, Trisha currently has 4 sewing machines.  Fill in the table below.  How many units of labor will Trisha employ before the value of the marginal product of labor is less than the cost of a labor hour?

y   L   MPL =     $87.50(MPL)
    1      
   20      
   40      
   60      
   80
Textbook 
Microeconomics

Microeconomics


Edition: 8th
Author:
Read 251 times
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#1
5 years ago
y   L    MPL =      $87.50(MPL)
 2   1   0.666667   58.33333
5.428835   20   0.245602   21.49018
6.839904   40   0.194935   17.05677
7.829735   60   0.170291   14.90046
8.617739   80   0.15472   13.53797

As the above table illustrates, when Trisha moves from employing 40 labor hours to 60 labor hours, the value of the marginal product of labor falls under the marginal cost of labor at $15.
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