Question

1. Below is a table showing the production numbers for a chair factory (where the production numbers are based on chairs being produced per day).

Workers	Total Product (TP)	Average Product (AP)	Marginal Product (MP)	Value Marginal Product (VMP)
0	0	-	-	-
1			10
2		15
3	70
4		30
5			50
6			40
7	240
8	260
9		30

a) Fill in the missing numbers for the TP, AP and MP columns (round to the nearest chair)

b) In one sentence explain what the AP of 4 workers being 30 tells us. (Use the AP number of 4 workers in your sentence.)

c) In one sentence explain what your answer for MP of the 4^th worker tells us. (Use the MP number of the 4th worker in your sentence.)

d) Given the fact that each chair produced in our factory can be sold at the market price of $10 per chair, fill in the VMP column (round to the nearest dollar).

e) In one sentence explain what your answer for VMP for the 4^th worker tells us.  (Use the VMP number of the 4th worker in your sentence.)

f) If the market wage for workers doing manufacturing work (such as chair production) is $180 per day, determine the amount of workers this firm should hire to maximize its profit.  Explain your answer using VMP.  

Answer 1

W	TP	AP	MP	VMP
0	0
1	10	10	10	100
2	30	15	20	200
3	70	23.33	40	400
4	120	30	50	500
5	170	34	50	500
6	210	35	40	400
7	240	34.29	30	300
8	260	32.5	20	200
9	270	30	10	100

b) AP of 4 workers = 30 tells us that output per worker = 30

c) MP of 4th worker = 50 tells us that the 4th worker produces 50 units to total output

d) VMP=MP*10

e) VMP of 4th worker = 500

f) If the market wage = 180, the firm will hire until VMP is greater than or equal to 180

so the firm will hire 8 workers