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1. Marginal revenue product is defined as the change in total revenue that results from the employment of an additional unit of a resource. A widget producer wishes to determine how the addition of pounds of rubber will affect its MRP and profits. See the table in attachment, and answer each of the questions.

a. The marginal product of the 3rd pound of rubber is _______________.
b. The marginal revenue product of the 3rd pound of rubber is ________.
c. The price of rubber is $110 per pound. To maximize profit, the widget producer should produce __________________.
d. The price of rubber is $110 per pound. To maximize profit, the widget producer should buy and use:
__________________.

2. See table in attachment to answer the following questions:

a. If the market represented in exhibit above is allowed to operate freely, total employment in the market will be __________________.
b. If a union raises the wage to $4, total employment in the market will be _______.
c. The approximate total surplus of labor after the union wage is _______________.
d. If the market is allowed to operate freely, total employment by the typical employer (illustrated in the right-hand panel) will be ________________.
e. If a union raises the market wage to $4, total employment by the firm (in the right-hand panel) will be ________________.

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Provides answers to each of the questions.

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1.

a. 10 widges

b.
If 2 pounds of rubber is used, total revenue is 35 X 10 = 350.
If 3 pounds are used, total revenue is 45 X 8 = 360. Marginal revenue is $10.

c. and d.

If no rubber is used, clearly total revenue is 0.
If 1 ...

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