Sam's Scarves has 2 knitting machines and employs 2 people. They produce 15 scarves a day. If the firm hires an additional person, the 3 workers can produce 19 scarves a day other things remaining the same. The market for scarves is perfectly competitive and the price of a scarf is $20. The value of marginal product of the third worker is _______.

Question

Quizplus · Accepted Answer

The value of the marginal product of the third worker is calculated by the increase in output (4 scarves, from 15 to 19) multiplied by the price of each scarf ($20). Thus, 4 scarves * $20/scarf = $80.

Sam's Scarves Has 2 Knitting Machines and Employs 2 People