2. Demand Table: Led Zep

5. I think per average income per capita in the U.S. is in the range 1)Less than $20,0009) $55,000-$60,000 2) $20,000-25,00010) more than $60,000 3) $25,000-30,000 4) $30,000-35,000 5) $35,000-40,000 6)$ 40,000-45,000 7) $45,000-50,000 8) $50,000-$55,000

6. I think per average income per capita in the U.S. is in the range 1)Less than $20,0009) $55,000-$60,000 2) $20,000-25,00010) more than $60,000 3) $25,000-30,000 4) $30,000-35,000 5) $35,000-40,000 6)$ 40,000-45,000 7) $45,000-50,000 8) $50,000-$55,000

7. Correct answer U.S. Per capita income in 2006 was about $43,000.

8. If the average value product of labor is greater than the wage, a firm can increase its profits by hiring more labor. A)True B)False

9. With 4 workers, Avg Val Product is $90. That exceeds the wage. Will profits increase from hiring a fourth worker? No. See table. workersv.outputAVPProfits 1$200 $175 2$300$150$250 3$350$116.66$275 4$360$90$260 Example: Wage is $25

10. A profit maximizing firm will choose the amount of labor that maximizes the marginal value product of labor. A)True B)False

11. To maximize Marginal Value Product hire 1 To maximize profits, hire 3. What does Marginal value product rule say? Hire additional labor so long as marginal value product exceeds the wage. workersv.outputMVPProfits 1$200 $175 2$300$100$250 3$350$50$275 4$360$10$260 Example: Wage is $25

12. If this firm maximizes profits by hiring 3 workers, the wage must be between: Number workers. Value of output. 1$200 2$240 3$300 4$340 5$350 A)$40 and $60 B)$85 and $120 C)$60 and $100 D)$60 and $80 E)$100 and $113.33

13. Why is this? According to the marginal profit rule, Firm should add workers so long as marginal value product of labor exceeds wage. Marginal value product of third laborer is $60, marginal value product of 4 th is $40. If wage is between $40 and $60, it pays to add third laborer, but not a 4 th.

14. And on to our lecture…