The table below provides information on the production schedule for sunglasses. It shows the number of worker-weeks that the firm can hire.
Question
| Labour input (worker-weeks) | Total products per week |
| 6 | 899 |
| 7 | 1004 |
| 8 | 1105 |
| 9 | 1202 |
| 10 | 1295 |
| 11 | 1384 |
| 12 | 1469 |
| 13 | 1550 |
a. Assuming sunglasses sell at €10 per unit, use the information above to derive a demand curve for labour.
b. Explain the difference between the marginal physical product and the marginal revenue product.
c. What is the maximum amount the firm would be willing to pay each worker per week if seven workers were hired?
d. If the going weekly salary is €900 per week, how many workers would be hired? Present your answer in both tabular and graphical form.
e. Suppose the industry faces a decline in the demand for sunglasses. What would be the new equilibrium wage and employment level? Explain your answer.
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