olofintuyi_mbaa_523_problem_4
1. Define the short-run and long-run and provide an aviation example.
2. In the short-run, Airbus manufactures aircraft at its existing factories; however, labor and other inputs such as those components purchased from suppliers (engines are one example) are variable. Airbus has received a substantial number of new orders and will increase its monthly aircraft production rate. Explain why the MPL will decrease above some level of labor as more workers are added. How does this decrease in MPL result in an increase in MC?
3. The table shows the marginal product of labor for a manufacturing firm in the short-run. The cost of an additional worker is $100 per day including benefits. The product sells for $2 per unit. Compute the value of the marginal product of labor. How many workers will the firm hire?
Labor (L)
MPL
VMPL
0
1
74
2
168
3
238
4
284
5
306
6
304
7
278
8
228
9
154
10
56
11
-66
4. NEW DELHI -- Each fall at harvest time, Leela Dhar Rajput used to hire 25 farm hands to work from dawn to dusk every day for a week bringing in the rice crop on his 20 acres of land in the central Indian state of Madhya Pradesh. This year, he plans to use a combine harvester instead. With the machine and the help of two or three men, he expects to finish the job in a single day. Indian agriculture is belatedly engaged in a mechanical revolution, boosting productivity in a sector that has long relied on cheap, surplus labor to tend crops in the world's second most populous country. Job opportunities in factories and services, plus the government's rural job-creation program guaranteeing 100 days of employment a year on public-works projects, have drained the pool of workers in villages. "I just can't find enough people to do the hard work in the fields anymore," says Mr. Rajput. [Mukherji, B. (2013, October 29). India's Farmers Mechanize. WSJ, B8.]
Show and label the amount of capital (K) and labor (L) employed with the displayed isocost line and
2. In the short-run, Airbus manufactures aircraft at its existing factories; however, labor and other inputs such as those components purchased from suppliers (engines are one example) are variable. Airbus has received a substantial number of new orders and will increase its monthly aircraft production rate. Explain why the MPL will decrease above some level of labor as more workers are added. How does this decrease in MPL result in an increase in MC?
3. The table shows the marginal product of labor for a manufacturing firm in the short-run. The cost of an additional worker is $100 per day including benefits. The product sells for $2 per unit. Compute the value of the marginal product of labor. How many workers will the firm hire?
Labor (L)
MPL
VMPL
0
1
74
2
168
3
238
4
284
5
306
6
304
7
278
8
228
9
154
10
56
11
-66
4. NEW DELHI -- Each fall at harvest time, Leela Dhar Rajput used to hire 25 farm hands to work from dawn to dusk every day for a week bringing in the rice crop on his 20 acres of land in the central Indian state of Madhya Pradesh. This year, he plans to use a combine harvester instead. With the machine and the help of two or three men, he expects to finish the job in a single day. Indian agriculture is belatedly engaged in a mechanical revolution, boosting productivity in a sector that has long relied on cheap, surplus labor to tend crops in the world's second most populous country. Job opportunities in factories and services, plus the government's rural job-creation program guaranteeing 100 days of employment a year on public-works projects, have drained the pool of workers in villages. "I just can't find enough people to do the hard work in the fields anymore," says Mr. Rajput. [Mukherji, B. (2013, October 29). India's Farmers Mechanize. WSJ, B8.]
Show and label the amount of capital (K) and labor (L) employed with the displayed isocost line and