Heavenly Bubbles Is a Small Soap Company Whose Main Product

question 124

Essay

Heavenly Bubbles is a small soap company whose main product is hand soap, which sells in a competitive market for $3 a bar. The output per hour of each workstation varies with the amount of labour used as the data in the table below indicates. Labour costs $12 and hour $$\begin{array} { | c | c | c | c | c | c | c | } \hline \begin{array} { c } \text { Quantity of } \\\text { Labour }\end{array} & \begin{array} { c } \text { Output } \\\text { per } \\\text { Hour }\end{array} & \begin{array} { c } \text { Marginal } \\\text { Product }\end{array} & \begin{array} { c } \text { Total } \\\text { Revenue } \\\text { I }\end{array} & \begin{array} { c } \text { Marginal } \\\text { Revenue } \\\text { Product I }\end{array} & \begin{array} { c } \text { Total } \\\text { Revenue } \\\text { II }\end{array} & \begin{array} { c } \text { Marginal } \\\text { Revenue } \\\text { Product II }\end{array} \\\hline 0 & 0 & / & / & / & / & / \\\hline 1 & 36 & & & & & \\\hline 2 & 60 & & & & & \\\hline 3 & 76 & & & & & \\\hline 4 & 86 & & & & & \\\hline 5 & 90 & & & & & \\\hline 6 & 92 & & & & & \\\hline\end{array}$$ a) Fill in the marginal product, total revenue I and marginal revenue I columns in the table above.
b) How many workers would the firm assign to each workstation?
c) Now assume that the wage rate increases to $16 an hour. How many workers should the firm now assign to each workstation?
d) Suppose the price of each bar increases to $4 each. Fill in the total revenue II column and marginal revenue product II in the table above to reflect this change.
e) Now how many workers would the firm assign to each workstation at a wage rate of $16?

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