Mangy Mutt Modifiers (3M) Grooms Dogs (A) If the Competitive Wage Rate Is $15

question 15

Essay

Mangy Mutt Modifiers (3M) grooms dogs. 3M has a fixed capital stock, and uses only one variable input, labor. Additionally, 3M sells its output and buys its labor under competitive market conditions. Using the information provided, answer the questions that follow. $$\begin{array} { c c c c } \begin{array} { c } \text { Units of } \\\text { Labor }\end{array} & \begin{array} { c } \text { Total Dogs } \\\text { Groomed }\end{array} & \begin{array} { c } \text { Marginal Physical } \\\text { Product of Labor }\end{array} & \begin{array} { c } \text { Marginal Revenue } \\\text { Product of Labor }\end{array} \\0&0\\1 & 15 & 15 & 22.50 \\2 & 43 & 28 & 42.00 \\3 & 75 & 32 & 48.00 \\4 & 105 & 30 & 45.00 \\5 & 130 & 25 & 37.50 \\6 & 150 & 20 & 30.00 \\7 & 164 & 14 & 21.00 \\8 & 174 & 10 & 15.00 \\9 & 182 & 8 & 12.00 \\10 & 188 & 6 & 9.00 \\11 & 192 & 4 & 6.00\end{array}$$ (a) If the competitive wage rate is $15.00 per unit of labor, how many units of labor will 3M hire? Briefly explain your answer.
(b) Calculate 3M's gross profit at that combination of wages and labor. Assume that there are zero capital costs, so gross profits equal total revenue less labor costs. Show your calculation.

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