The Following Table Depicts The Output Of A Firm That Manufa

The Following Table Depicts The Output Of A Firm That Manufactures Com

The following table depicts the output of a firm that manufactures computer printers. The printers sell for $100 each. The table provides data on labor input (workers per week), total physical output (printers per week), and requires calculations for marginal physical product (MPP) and marginal revenue product (MRP).

Calculate the marginal physical product at each input level above 10 units. (enter numeric responses in the table above using real numbers). Calculate the marginal revenue product at each input level above 10 units.

Paper For Above instruction

In analyzing the production process of a firm, understanding how inputs contribute to output is crucial. The marginal physical product (MPP) signifies the additional output generated by adding one more unit of input, while marginal revenue product (MRP) reflects the additional revenue generated by the extra output, considering the product’s price. This analysis is essential for decisions related to resource allocation, productivity optimization, and understanding diminishing returns.

Calculating Marginal Physical Product (MPP)

The MPP is derived by subtracting the total output at the previous level from the current total output. For each input level above 10 units, the MPP is calculated as:

MPP = Current Total Output − Previous Total Output

Given the total outputs from the table:

• At 11 workers: MPP = 251 - 238 = 13 printers
• At 12 workers: MPP = 260 - 251 = 9 printers
• At 13 workers: MPP = 265 - 260 = 5 printers
• At 14 workers: MPP = 266 - 265 = 1 printer

Calculating Marginal Revenue Product (MRP)

The MRP is computed by multiplying the MPP by the price per printer ($100). This reflects the additional revenue attributable to each additional worker, based on the extra output they produce.

MRP = MPP × Price per Printer

Using the above MPP and a price of $100:

• At 11 workers: MRP = 13 × 100 = $1,300
• At 12 workers: MRP = 9 × 100 = $900
• At 13 workers: MRP = 5 × 100 = $500
• At 14 workers: MRP = 1 × 100 = $100

Implications and Observations

The decreasing marginal physical product with increasing labor aligns with the law of diminishing returns, typical in production environments. As more labor is added, particularly beyond a certain point, each additional worker contributes less and less to total output. This diminishing productivity affects marginal revenue products, thereby influencing hiring decisions and optimal resource allocation.

For decision makers, understanding these metrics enables informed choices about labor employment levels, balancing costs with the generated revenue. The significant drop in MPP and MRP beyond a specific number of workers suggests an optimal employment level around or before 14 workers, where additional labor yields minimal output gains and revenue increases.

This analysis not only guides operational efficiency but also provides insights into market dynamics, input substitution, and capacity planning, vital for maintaining profitability and competitive advantage in manufacturing sectors.

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