1 The IDEA Company has the following production function for

1. The IDEA Company has the following production function for producing light bulbs. No. of |Calculators (YlMPN No. of Workers Calculators (Y) MPNMPN x 1.20 PN ers 12 44 0 12 6 12 12 28 37 40 33.6 a. Find the MPN for each level of employment and fill in table above. The IDEA Company pays w-s40hour and the price of each light bulb-S7. Calculate the real wage? (Show your work. S-7l

Solution

Ans g)

The labor demand curve depicts the value of the marginal product of labor

as a function of quantity of labor hired. Utilizing this , it can be seen that the

following changes shift the labor demand curve:

The output price. When output price increses, the labor demand curve shifts

to the right more labor is demanded at each wage. When output price decreases,

less labor is demanded at each wage.

h)profit maximizing level of employment=4

i)Firms utilize certain combination of labor and capital to produce output. The labor uses the capital in the production process.To increase productivity, each worker must be able to produce more output. This is called as labor productivity growth. The only way for this to happen is by an in increase in the capital utilized in the production process. This increase can be in the form of either human capital or physical capital.Additions to capital can take the form of both quantity and quality increases