The marginal product of labour (measured in units of output)for New Age Nirvana is given by MPN = A(200 - N)where A measures productivity and N is the number of labour hours used in production.Assume that the price of output is $3 per unit and the demand for labour is 195.What will be the level of productivity if the nominal wage is $30?
A)5
B)10
C)2
D)12

Question

Quizplus · Accepted Answer

The marginal product of labor is equal to the change in output divided by the change in labor input. In this case, the marginal product of labor is given by MPN = A(200 - N). The price of output is $3 per unit, so the value of the marginal product of labor is VMPN = 3MPN = 3A(200 - N). The demand for labor is 195, so the nominal wage is W = 30. The profit-maximizing level of employment is where the value of the marginal product of labor is equal to the nominal wage, or VMPN = W. Substituting the given values, we get 3A(200 - N) = 30, which simplifies to A(200 - N) = 10. Solving for A, we get A = 10/(200 - N). Since the demand for labor is 195, we have A = 10/(200 - 195) = 10/5 = 2.

The Marginal Product of Labour (Measured in Units of Output)for