Suppose Woody Chuck's business is to clear trees for housing developments.Given the constraints of fixed capital,the production function is .Suppose Woody Chuck's is one of many firms clearing land and that the market price per cleared lot is $5000.(Note )The marginal Revenue Product of labor is
A) constant at $5000.
B) constant at 25

Question

Suppose Woody Chuck's business is to clear trees for housing developments.Given the constraints of fixed capital,the production function is  .Suppose Woody Chuck's is one of many firms clearing land and that the market price per cleared lot is $5000.(Note  )The marginal Revenue Product of labor is
A) constant at $5000. 
B) constant at 25

Quizplus · Accepted Answer

The marginal revenue product of labor is the additional revenue a firm receives from hiring one more unit of labor. In the given production function, MPL (marginal product of labor) is decreasing as more labor is hired. Therefore, the marginal revenue product of labor will also be decreasing. As the market price per cleared lot is fixed at $5000, the marginal revenue product of labor will be equal to the MPL multiplied by the market price per cleared lot. Therefore, it will be decreasing as well. Hence, the correct answer is C, which is a decreasing function of labor.

Suppose Woody Chuck's Business Is to Clear Trees for Housing