Diminishing Marginal Returns

timer Asked: Mar 13th, 2016

Question description

a. As Ron hires the first, the second and the third worker, what happens to his output? What happens to his marginal product? Explain why this could be occurring. 

b. With which worker do diminishing marginal returns begin? 

c. Calculate the VMPL (also known as, marginal revenue product) for the fifth worker. Show your work for full credit. 

d. How many workers should Ron hire to maximize profit? Explain why that number is the best for maximizing profit. 

e. In what type of market structure does Ron’s firm compete? How do you know? In what type of market does Ron’s firm hire workers? How do you know?


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