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Standale Plastics produces plastic dustpans, using a semi-automated system of five machines to produce pans. The amount of labor to tend the machines, repair, adjust input flows, and remove completed pans, is variable, and output tends to follow the formula:
Q = 300L0.6, where Q = units of output produced per day and L = number of daily workers.
(a) Compute the total product per day and the marginal product of labor for the first five workers.
(b) Standale sells the dustpans to retailers at a price of $1 each, and can hire labor at a wage of $125 per day. What is the optimal amount of labor to hire? What is the optimal output of dustpans?
(c) Suppose that the price of the dustpans increases to $1.25. What is the new optimal amount of labor?
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