Table 18-10
Consider the following daily production data for Caroline's Cookies, Inc. Caroline's sells cookies for $2.50 each and pays the workers a wage of $325 per day.

-Refer to Table 18-10.What is the value of the marginal product of the first worker?

Question

Table 18-10
Consider the following daily production data for Caroline's Cookies, Inc. Caroline's sells cookies for $2.50 each and pays the workers a wage of $325 per day.
 
-Refer to Table 18-10.What is the value of the marginal product of the first worker?

Quizplus · Accepted Answer

The value of the marginal product of the first worker can be calculated as follows:
MPL1 = (Total output with one worker)-(Total output with zero workers) = ($550-$0) = $550
MPP1 = MPL1 x Price per cookie = $550 x $2.50 = $1,375
Marginal product is the additional output produced by one more unit of input (in this case, one more worker). Therefore, the value of the marginal product represents how much additional revenue the company generates by hiring one more worker. In this case, the first worker generates $1,375 of additional revenue, which is much greater than the cost of hiring the worker ($325). Therefore, it is profitable for the company to hire the first worker.

Table 18-10 Consider the Following Daily Production Data for Caroline's Cookies, Inc