Page 725 - Krugmans Economics for AP Text Book_Neat

figure 69.2 The Production Function for George and Martha’s Farm

(a) Total Product (b) Marginal Product of Labor
Quantity Marginal
of wheat product of labor
(bushels) (bushels per
worker)
100 TP
19
80 17
15
13
60
11
9
40
7
5
20 MPL
0 1 2 3 4 5 6 7 8 0 1 2 3 4 5 6 7 8
Quantity of labor (workers) Quantity of labor (workers)

Panel (a) shows how the quantity of output of wheat on George Panel (b) shows how the marginal product of labor depends on the
and Martha’s farm depends on the number of workers employed. number of workers employed.

numbers behind the figure. Note: sometimes the marginal product (MP) is called the
marginal physical product or MPP. These two terms are the same; the extra “P” just em-
phasizes that the term refers to the quantity of physical output being produced, not
the monetary value of that output.
If workers are paid $200 each and wheat sells for $20 per bushel, how many workers
should George and Martha employ to maximize profit?

table 69.1

Employment and Output for George and Martha’s Farm

Quantity of Quantity of Marginal product of labor
labor wheat ΔQ
L Q MPL ΔL
(workers) (bushels) (bushels per worker)
0 0
19
1 19
17
2 36
15
3 51
13
4 64
11
5 75
9
6 84
7
7 91
5
8 96

module 69 Introduction and Factor Demand 683