# average produce of labor question- makes no sense

Hey, Schweser book 6, exam #2, morning session: The Zaxon company produces one producat and labor is the only variable resource in production. In the short run, Zaxon faces a horizontal demand curve @ \$20/unit. The average product of labor in the short run is: Resource Units: Avg. Product of Labor: 1 25 2 22.5 3 20 4 17.5 If the price of each unit of labor (worker-days) is \$350, and only whole units can be employed, how many units of labor will Zaxon employ? The answer is 2 units. Not sure why. I thought it should be 1 units, unless the one unit got loanly and needed someone to talk to. Or, maybe the factory is in a bad neighborhood. But, 2 units makes no sense since the Avg. product of labor goes down immediately after 1 unit is used. Any ideas?

big fin we had this question a few days ago it’s 2 because 3rd unit costs 350 and brings additional revenue 3*20-2*22.5=15units@20 dollars=300 producer will produce until mr=mc not more than that

unit Avg product Total product Marginal product MRP 1…25 25 2 22.5 45 20 20*20=400 3 20 60 15 20*15=300 4 17.5 68 8 Price of labor 350 The revenue generated by the labor should be more than 350 which is 2 workers.

yup… remember it since florin used to explain it to me… http://www.analystforum.com/phorums/read.php?11,631734,631734#msg-631734

If you use total product to compute Total revenue - Total cost you will see that Profit is maximized at 2 units Total product…Price…Total Revenue 1 unit = 25units…sold at \$20 (demand) = 500 2 units = 45 units…sodld at \$20 (demand) = 900 3 units = 60 units…sold at \$20(demand) = 1200 4 units = 70 units…sold at \$20 (demand) = 1400 Units…Total cost 1…350 2…700 3…1050 4…1400 Total revenue - Total Cost = Profit 1 unit = 150 profit 2 unit = 200 profit 3 units = 150 profit 4 units = 0 profit