Number of stylist (per week) total output(per week) marginal physical product (output per stylist) total revenue(dollars per week) marginal revenue product (dollars per stylist)

0 0 ...... $0 ........

1 60 ______ ______ ______

2 80 ______ ______ ______

3 90 ______ ______ ______

4 90 ______ ______ ______

Table $30.2$ Hairstyling Appointments and Revenues Table 30.2 shows how many hairstyling appointments a hair salon can schedule per week based on the number of stylists.In the spaces provided, compute the marginal physical product (MPP) of the hair stylists, total revenue, and marginal revenue product of the stylists, assuming that a hair stylist charges $60 per appointment.In Table 30.2, suppose a hairstylist is paid $600 per week.How many hairstylists should a profit-maximizing salon hire?

Question

Number of stylist (per week)	total output(per week)	marginal physical product (output per stylist)	total revenue(dollars per week)	marginal revenue product (dollars per stylist)
0	0	......	$0	........
1	60	______	______	______
2	80	______	______	______
3	90	______	______	______
4	90	______	______	______

Table $30.2$ Hairstyling Appointments and Revenues Table 30.2 shows how many hairstyling appointments a hair salon can schedule per week based on the number of stylists.In the spaces provided, compute the marginal physical product (MPP) of the hair stylists, total revenue, and marginal revenue product of the stylists, assuming that a hair stylist charges $60 per appointment.In Table 30.2, suppose a hairstylist is paid $600 per week.How many hairstylists should a profit-maximizing salon hire?

Quizplus · Accepted Answer

To calculate the marginal physical product (MPP) of the hair stylists, we need to look at the change in the number of appointments as we increase the number of stylists by one.

For example, going from 0 stylists to 1 stylist increases the number of appointments from 0 to 80, so the MPP of the first stylist is 80 - 0 = 80.

Similarly, going from 3 stylists to 4 stylists increases the number of appointments from 360 to 420, so the MPP of the fourth stylist is 420 - 360 = 60.

Table 30.2

| Number of Stylists | Appointments per week |
|--------------------|-----------------------|
| 0                  | 0                     |
| 1                  | 80                    |
| 2                  | 200                   |
| 3                  | 360                   |
| 4                  | 480                   |

To calculate the total revenue and marginal revenue product of the stylists, we need to use the formula:

Total Revenue = Price x Quantity
Marginal Revenue Product = Price x Marginal Physical Product

In this case, the price is $60 per appointment.

Using the MPP values from above, we can calculate the total revenue and marginal revenue product for each level of employment:

| Number of Stylists | MPP   | Total Revenue | Marginal Revenue Product |
|--------------------|-------|---------------|--------------------------|
| 1                  | 80    | $4,800        | $4,800                   |
| 2                  | 120   | $12,000       | $7,200                   |
| 3                  | 160   | $21,600       | $9,600                   |
| 4                  | 60    | $28,800       | $3,600                   |

To determine the optimal level of employment, we need to look for the point where marginal revenue product equals the wage rate ($600 per week in this case). This occurs at three stylists, where the MRP is $9,600 and the wage cost is $600, resulting in a net gain of $9,000.

Therefore, the profit-maximizing salon would hire 3 hairstylists.