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Homework answers / question archive / Fresh Veggie is one of many small farms in Florida operating in a perfectly competitive market
Fresh Veggie is one of many small farms in Florida operating in a perfectly competitive market. Farm labor is also perfectly competitive, and Fresh Veggie can hire as many workers as it wants for $25 a day. The daily productivity of a tomato picker is given in the table below. Number of Workers 0 Bushels of Tomatoes 0 1 12 22 2 3 30 4 5 35 38 40 6 Instructions: Enter your answer as a whole number. If a bushel of tomatoes sells for $6, Fresh Veggie will hire: worker(s). S
Research suggests that the productivity of capital has increased relative to the productivity of labor in the last two decades. Which of the following best describes the likely effect on the factor distribution of income, all other things equal? The rental rate on capital would rise, but the share of income would not change. O The share of factor income received by capital would increase, and the share of factor income going to labor would decrease. O The wage rate would fall, but the share of income would not change. O Total income received by labor would fall. The share of factor income received by labor would increase, and the share of factor income going to capital would decrease.
??????Answer :
Since, the firm's are operating under perfect competition, therefore, P=MR,
Marginal product (MP) = Change in total product/change in number of workers
Marginal Revenue Product (MRP) = MP × MR
Where, P= MR = $6
Table : Calculating MP and MRP :
| Number of Workers | Bushels of tomatoes | Marginal Product | Marginal Revenue Product |
|---|---|---|---|
| 0 | 0 | — | |
| 1 | 12 | 12 | 72 |
| 2 | 22 | 10 | 60 |
| 3 | 30 | 8 | 48 |
| 4 | 35 | 5 | 30 |
| 5 | 38 | 3 | 18 |
| 6 | 40 | 2 | 12 |
Now, we have given that, wages per day is $25, so that, the firm will always choose the number of workers at which the marginal revenue product (MRP) is equal to the wages or at the maximum output where MRP is greater than wages.
Thus, the firm will choose 4 workers where, MRP($30)>wages($25), and the maximum output is 35 bushels of tomatoes.
