Work

The firm should hire no more than four days of labor because on the fifth day of labor, the firm earns a loss in profit of $20.00. The fifth day yields a marginal product of labor of only $30.00 hence paying a wage of $50.00 will end with a marginal profit of -$20.00.

2. Factors of production are the resources used to produce a good or service like “land,labor, and capital” (Mankiw, 5th Ed.) Factors of production allow or facilitate the production of goods or services however they are not part of the final product like a piece of metal for an example. Labor is the human mental and or physical exertion into the production of a product whereas a certain wage is paid for this effort. Land is everything in the world that is not created by a human. This includes the air, sunlight, trees, water and minerals. Capital is the physical products that are produced by the labor that is exerted during the production of the goods and services. The price/return of labor is the wages that are paid to the workers who exert the energy to produce the goods and service. The price of land is the amount paid to rent or buy the office space or building used in the production or sale of the product or service. Lastly, capital price is the money spent on the desks, chairs and other equipment needed in the production of the final product. All three earn their marginal contribution to the production process. The marginal product of labor is determined by the amount total output that will be produced by increasing the amount of workers. A firm will base its decision to hire additional units of labor using the marginal decision making rule that is, if the extra output that is produced by hiring one more unit of labor adds more to total revenue than it adds to total cost, the firm will increase profit by increasing its use of labor. Therefore, it is profitable for the firm to hire more labor since additional labor. The marginal product of land and capital are determined by the supply and...