Answer each of the following questions using economic theory covered in this les
ID: 1250421 • Letter: A
Question
Answer each of the following questions using economic theory covered in this lesson.1. Marginal revenue product is defined as the change in total revenue that results from the employment of an additional unit of a resource. A widget producer wishes to determine how the addition of pounds of rubber will affect its MRP and profits. See the table below, and answer the question.
Pounds of rubber Number of widgets Price of widgets ($)
(quantity of resource) (total product)
0 0 -
1 20 12
2 35 10
3 45 8
4 50 6
5 53 4
a. The marginal product of the 3rd pound of rubber is _______________.
Explanation / Answer
Here's the relationship between: pounds of rubber, total revenue = widgets*price, and marginal revenue (TR with this number of pounds, minus with 1 few pound): Lbs., TR, MR 0, 0, - 1, 240, 240 2, 350, 90 3, 360, 10 The 3rd lb. of rubber brings in an extra $10 of revenue, so that's the marginal revenue product.