Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day.
-Refer to Table 18-B. What is the value of the marginal product of the second worker?
A)$150
B)$350
C)$450
D)$1,050

Question

Table 18-B
Consider the following daily production data for MadeFromScratch, Inc. MadeFromScratch sells cupcakes for $3 each and pays the workers a wage of $325 per day. 
-Refer to Table 18-B. What is the value of the marginal product of the second worker?
A)$150 
B)$350 
C)$450 
D)$1,050

Quizplus · Accepted Answer

The marginal product of labor (MPL) is the additional output produced by adding one more unit of labor. To calculate the MPL, we take the difference in output produced by two levels of labor input. In this case, the MPL of the second worker can be calculated as the difference between the total production with 2 workers and the total production with 1 worker.

Total production with 1 worker = 60 cupcakes
Total production with 2 workers = 140 cupcakes
MPL of second worker = (Total production with 2 workers - Total production with 1 worker) / (Number of workers added)
= (140 - 60) / (2 - 1)
= 80 cupcakes

The value of the MPL is then calculated by multiplying the MPL by the price of each cupcake:

Value of MPL of second worker = MPL x Price of Cupcake
= 80 x $3
= $240

Since the wage paid to the workers is $325 per day, the firm would not want to hire an additional worker if the MPL of the worker is less than $325. In this case, the MPL of the second worker is $240, which is less than the wage paid, so the firm should not hire a third worker. Therefore, the best choice is not to hire an additional worker.

Table 18-B Consider the Following Daily Production Data for MadeFromScratch, Inc. MadeFromScratch