Compute the marginal revenue product

Reference no: EM1373727

A. From the table below, answer the questions that follow.

Demand and Supply of Labor Information
Employment Total Output Product Price Wage Rate

50 708 $1.27 $6
51 760 1.26 7
52 810 1.25 8
53 858 1.24 9
____________

a. Compute the marginal revenue product (MRP) at each level of employment.
b. How many units of labor will this firm hire in order to maximize its profits?

B. Assume the following payoff matrix in which the numbers indicate the profits in millions of dollars for a duopoly based either on a high-price or a low-price strategy.

Firm A
High Price Low Price
Firm B High Price A = $500, B = $500 A = $650, B = $250
Low Price A = $250, B = $650 A = $300, B = $300

[A] What will be the result (in profits) when each firm chooses a high-price strategy?
[B] What will be the result when Firm A chooses a low-price strategy while Firm B maintains a high-price strategy?
[C] What will be the result when each firm chooses a low-price strategy?
[D] Compute the Nash equilibrium for this matrix.

Reference no: EM1373727

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