Economics Assignment

*Price of Good = 100 Wages per Labour = 1000

Short Run Production Function: TC = 1000L

Output Table:

Labour (L) Output P=MR APL MPL MRPL MRCL TC TR Profit

1 6 100 6.0 10 1000 1000 1000 600 -400
2 18 100 9.0 12 1200 1000 2000 1800 -200
3 55 100 18.3 37 3700 1000 3000 5500 2500
4 96 100 24.0 41 4100 1000 4000 9600 5600
5 117 100 23.4 21 2100 1000 5000 11700 6700
6 127 100 21.2 10 1000 1000 6000 12700 6700
7 132 100 18.9 5 500 1000 7000 13200 6200
8 133 100 16.6 1 100 1000 8000 13300 5300
9 133 100 14.8 0 0 1000 9000 13300 4300
10 133 100 13.3 0 0 1000 10000 13300 3300

1. Determine the optimal no. of labour by firm

We can see that the optimal number of labour the firm should hire is 4. Hiring the 5th labour
worker would lead to a fall in MRPL and ultimately total profits as we can see from the
diminishing returns in the table.
2. Total labour cost with optimal no. of labour
Total Labour Cost will be 4000 with optimal labour
3. Total Revenue with optimal labour
Total Revenue will be 9600 with optimal labour
4. Profit with optimal labour

Hence, Profit will be 5600 with optimal labour

 5. Labour Demand Curve

Labour Demand Curve

45
Marginal Prodcut Labour (MPL)

40
35
30
25
20
15
10
5
0
0 1 2 3 4 5 6 7 8 9 10
Labour (L)

Output
140

120

100
Output

80

60

40

20

0
0 1 2 3 4 5 6 7 8 9 10
Labour (L)

Average Product Labour

30

25

20
APL

15

10

0
0 1 2 3 4 5 6 7 8 9 10
Labour (L)
 Profit
7500

6500

5500

4500
Profit

3500

2500

1500

500

-500 0 1 2 3 4 5 6 7 8 9 10
Labour (L)