Question

A local manufacturing block factory in Winneba (ABIJACK construction Ltd) can produce the
following output per day at the various employment levels:
Workers Output MPL
0 0 -
1 100 a
2 150 b
3 190 c
4 225 d
5 250 e
a. Fill in the values a-e [8 marks]
b. If the price per block is GHC2, plot the marginal revenue product of labour against the
number of workers. [8 marks]
c. If ABIJACK construction must pay GHC 75/day, how many workers will this firm
employ?

Answer 1

a) Ans:

Workers	Output	MPL
0	0	--
1	100	100
2	150	50
3	190	40
4	225	35
5	250	25

Explanation:

MPL = Change in output / Change in number of workers

b) Ans:

Explanation:

MRPL = MPL * Price of the output

Workers	Output	MPL	MRPL
0	0	--	--
1	100	100	200
2	150	50	100
3	190	40	80
4	225	35	70
5	250	25	50

Ans: This firm will employ 3 workers.

Explanation:

According to the marginal productivity theory , a firm will employ the number of workers where marginal revenue product of labour equals wage rate ( MRPL = W) or marginal revenue product of labour is greater than wage rate ( MRPL > W) .