Assignment

Review “Paper Presentation on Marginal Revenue Product and Optimal Employment Level: An Illustration of Student Involvement” and the associated PowerPoint and then answer the following questions: Do you think the diminishing returns principle (from the law of diminishing marginal productivity) is applicable to the company/firm where you work? (I work at Verizon Communications) Why or why not? Do you think the MP (marginal productivity) figures in the presentation are based on a single variable factor, or all factors of production? Why? In the paper, what other input factors are necessary to make the holiday wreaths? Are those other factors considered variable in the long run? Why or why not? How can you tell if you have increasing or decreasing returns to scale for the holiday wreath example?

Define the concept of marginal revenue product (MRP), or value of the marginal product as defined on p. 377 of the textbook (value of the marginal product is the marginal product of an input times the price of the output); then relate that to the marginal cost of the labor input factor. Explain why a competitive, profit-maximizing firm hires workers up to the point at which MRP and the marginal cost (i.e., wage rate) are equal. Would a company hire more workers if the MRP is greater than the wage rate (i.e., the price of the labor)? Why or why not? Explain in terms of trying to maximize profits. Would a company hire fewer workers if the MRP is less than the wage rate (i.e., the price of the labor)? Why or why not? Explain in terms of trying to maximize profits.

APA Format 2 pages 3 sources.