Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 7, Problem 2.3P
To determine
Estimate the wage of less skilled worker.
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Suppose Alex owns a business making quilts that generates $7,000 a month in revenue. Each month, Alex spends $1,600 on fabric and other sewing materials, and he pays his two employees a combined total of $4,000 per month (they each earn $2,000). Alex makes his quilts in a workshop he has set up in his basement. If Alex did not own the quilt business, he would work as a yoga instructor earning $2,200 per month, and he would use the basement as a TV room, an option he would value at $60 per month.
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Instructions: Enter your answer as a whole number. If you are entering a negative number, be sure to include a negative sign (-).
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You are planning a move across town. Doing your research you find that the average rate of a moving company is $250 per hour for two movers (moving truck included). The marginal benefit you receive from each hour of the two movers’ time (and truck) is listed in the accompanying table.
Hours of movers’ time
Marginal benefit
1 hour
$850
2 hours
$620
3 hours
$500
4 hours
$250
5 hours
$150
6 hours
$100
7 hours
$0
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Now suppose that instead of paying per hour, a moving company offers a flat rate of $1,500 for two movers plus a truck for an eight-hour day. Would you hire the movers? How has your consumer surplus changed?
Suppose that Maria is starting a food ordering and delivery company.
Customers order meals online. Employees prepare the meals and deliver them to customers.
Maintenance of the online platform for ordering meals costs the company $5 per day.
The company also rents space where orders are prepared. Rent costs $50 per day.
To make the deliveries, the business also rents two delivery cars that cost $10 each per day.
The costs of ingredients for preparing different numbers of meals are provided in the table below.
Maria also has to hire between 0 and 10 workers (depending on the number of meals she chooses to make) to buy ingredients, prepare meals, and deliver the orders.
She will pay each employee $120 per day.
The first two columns of the table below show how many meals different number of workers can prepare and deliver.
Price per meal
$50
Workers Meals (Output
(Labor L)
Q)
0
1
2
3
4
5
6
7
8
9
10
MPL
FC
Cost of
ingredients
VC
$10
$75
$100
$121
$138
$152
$165
$177
$189
$199
$210
TC
AFC
0…
Chapter 7 Solutions
Principles of Economics (12th Edition)
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