Paper Pushers Inc. hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company's hourly output varies with the number of workers hired, as shown in the table below. If the market price of each page is $5, the first worker's VMP is ______ per hour, and the third worker'sVMP is ______ per hour.

Question

Paper Pushers Inc. hires workers in a competitive labor market. Apart from labor, the company has no other variable inputs. The company's hourly output varies with the number of workers hired, as shown in the table below.  If the market price of each page is $5, the first worker's VMP is ______ per hour, and the third worker'sVMP is ______ per hour.

Quizplus · Accepted Answer

To calculate the value of marginal product (VMP) of the first worker, we need to find the increase in total output due to the first worker and multiply it by the market price of each page.

VMP of the first worker = ($160 - $0) / 1 x $5 = $800 / hour

To calculate the VMP of the third worker, we need to find the increase in total output due to the third worker, subtract the increase in total output due to the second worker, and then multiply it by the market price of each page.

VMP of the third worker = ($460 - $320) / 2 x $5 = $140 / hour

Therefore, the best choice is B as it lists the correct VMP of the first and third workers.