Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 17, Problem 9DQ
To determine
The principal-agent problem.
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Consider a small landscaping company run by Mr. Viemeister. He is considering increasing his firm’s capacity. If he adds one more worker, the firm’s total monthly revenue will increase from $50,000 to $58,000. If he adds one more tractor, monthly revenue will increase from $50,000 to $62,000. Each additional worker costs $4,000 per month, while an additional tractor would also cost $4,000 per month. LO16.5 a. What is the marginal product of labor? The marginal product of capital? b. What is the ratio of the marginal product of labor to the price of labor (MPL/PL)? What is the ratio of the marginal product of capital to the price of capital (MPK/PK)? c. Is the firm using the least-costly combination of inputs? d. Does adding an additional worker or adding an additional tractor yield a larger increase in total revenue for each dollar spent?
MC
ATC
AVC
MARKET PRICE
AFC
15
P.
The following figure shows the revenue and cost curves for a firm X.
RM
10
a.
b.
C.
7
6
LO
5
4
3.5
0
20 25 30
MC
40
AVC
AC
AR=MR
Units
If a firm X achieves productivity efficiency, what will be the total revenuel
generated
At what price will a firm stop operating? Please explain.
If the market price is RM4.00, what is the total profit or total loss.
Chapter 17 Solutions
Economics (Irwin Economics)
Ch. 17.3 - Prob. 1QQCh. 17.3 - Prob. 2QQCh. 17.3 - Prob. 3QQCh. 17.3 - Prob. 4QQCh. 17.A - Prob. 1ADQCh. 17.A - Prob. 2ADQCh. 17.A - Prob. 3ADQCh. 17.A - Prob. 4ADQCh. 17.A - Prob. 5ADQCh. 17.A - Prob. 1ARQ
Ch. 17.A - Prob. 2ARQCh. 17.A - Prob. 3ARQCh. 17.A - Prob. 4ARQCh. 17.A - Prob. 1APCh. 17.A - Prob. 2APCh. 17 - Prob. 1DQCh. 17 - Prob. 2DQCh. 17 - Prob. 3DQCh. 17 - Prob. 4DQCh. 17 - Prob. 5DQCh. 17 - Prob. 6DQCh. 17 - Prob. 7DQCh. 17 - Prob. 8DQCh. 17 - Prob. 9DQCh. 17 - Prob. 10DQCh. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Prob. 3RQCh. 17 - Prob. 4RQCh. 17 - Prob. 5RQCh. 17 - Prob. 6RQCh. 17 - Prob. 7RQCh. 17 - Prob. 1PCh. 17 - Prob. 2PCh. 17 - Prob. 3PCh. 17 - Prob. 4PCh. 17 - Prob. 5P
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- Industry Z is made up of the following firms. One firm makes up 40% of the total market sales, one of the firms make up 25%, one of the firms make up 20%, one firm makes up 10%, and the remaining firms make up 5% of the total market sales. What is the HHI for this industry? O 2,730 O 95 O 1.800 O 1,200arrow_forwardEmployment 0 1 2 3 4 5 6 O 4-5 workers. 3-4 workers. Product O 0-1 workers. O 5-6 workers. 0 6 11 15 18 20 21 Price 5 5 5 5 5 5 On the basis of the information in the table above, if the firm is hiring workers under purely competitive conditions at a wage rate of $10, it will choose to employ between: 5 Revenue MRParrow_forwardA firm's production is as follows: Q = 12K2L/3, where L is number of workers and K is number of machines. The firm spent $100,000 for the 81 machines it owns. The selling price of the output is $300, and each worker can be hired for $48. What is the firm's maximum total profit? O $372,000 O $422,000 O $224,000 O $148,000arrow_forward
- You said that "this may result in a steeper AS curve due to the fact that firms can produce more output for a given price level.". However, I think that steeper AS without the change of y-intercept(shift) will have opposite effect. I drew a diagram to compare different As curves with same y intercept and different slopes. It is clear that for same level; of price level, steeper AS has loer output (Y2) than faltter AS (Y1), could u please explain it for me? Thanks a lot :)arrow_forward. Suppose that a car dealership wishes to see if efficiency wages will help improve its salespeople’s productivity. Currently, each salesperson sells an average of one car per day while being paid $20 per hour for an eight-hour day. LO17.8 What is the current labor cost per car sold? Suppose that when the dealer raises the price of labor to $30 per hour the average number of cars sold by a salesperson increases to two per day. What is now the labor cost per car sold? By how much is it higher or lower than it was before? Has the efficiency of labor expenditures by the firm (cars sold per dollar of wages paid to salespeople) increased or decreased? Suppose that if the wage is raised a second time to $40 per hour the number of cars sold rises to an average of 2.5 per day. What is now the labor cost per car sold? If the firm’s goal is to maximize the efficiency of its labor expenditures, which of the three hourly salary rates should it use: $20 per hour, $30 per hour, or $40 per hour?…arrow_forwardLO 11.2: I can calculate marginal cost, revenue, and profit and distinguish between marginal cost and average cost. Suppose that Patrick's Handmade Puppets has a production cost that is given by C(x) = 2,000 + 130x – 0.6x2 + 0.002x3 dollars (0arrow_forwardWorkers Pizza Fixed cost in $ per day per day Variable cost in S TC per day 400 per day [25 (75 400 200 6 00 750 850 400 350 450 115 400 145 400 600 lo00 1200 170 400 800 8. Referring to the table above, when the second worker is hired, the marginal cost per pizza is equal to: a) $3 b. $75 750-600 75-25 150 ATC %3D 5u C. $50 d. $150 Duutp Dout 際ATCarrow_forwardComplete the following labor supply table for a firm hiring labor competitively: LO17.2 Show graphically the labor supply and marginal resource (labor) cost curves for this firm. Are the curves the same or different? If they are different, which one is higher? Plot the labor demand data of review question 2 in Chapter 16 on the graph used in part a above. What are the equilibrium wage rate and level of employment?arrow_forwardConsider the case of a manufacturing company which produces and sells brand pens. The selling price is $20 per pen, the total fixed operating cost is $2 million, and the variable cost per unit is $10, the total fixed financing cost is $500,000. How many pens should the company sells so it would neither make a profit or loss? O a. 4,000,000 O b. 20,000,000 O c. 200,000 O d. 25,000 O e. 2,500,000arrow_forwardYou are the owner and only employee of a company that sets odds for sporting events. Last year you earned a total revenue of $100,000. Your costs for rent and supplies were $50,000. To start this business you invested an amount of your own capital that could pay you a return of $20,000 a year. Your economic profit last year was O $50,000 O $60,000 O $10,000 O $30,000arrow_forwardNumber of Employees Total Production Marginal Product of Labor Marginal Revenue Product O 1 2 3 4 O Four employees O One employees O Three employees O OTwo employees 9 24 36 43 O 9 If the price of the item is $15.00 per unit and the employees cost $125 each, how many employees should the firm hire to maximize their profit? 15 12 7arrow_forwardMC ATC AVC MARKET PRICE AFC 15 P.arrow_forwardarrow_back_iosSEE MORE QUESTIONSarrow_forward_ios
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