Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 16, Problem 2DQ
To determine
Reason for not employing more labors.
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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?
. 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?…
acroeconómic Policy and Natural Resources (10)|| Sp
Time left 1:23:57
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When a par ar firm is fully utilizing its capital, its output is given by Y = 10 × LO5. The cost of labour is OMR1 per
unit. To maximize profit, how many units of labour should this firm use?
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O a. 50
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O b. 100
О с. 5
O d. 25
O e. 3.16
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- Suppose that low-skilled workers employed in clearing woodland can each clear one acre per month if each is equipped with a shovel, a machete, and a chainsaw. Clearing one acre brings in $1,000 in revenue. Each worker’s equipment costs the worker’s employer $150 per month to rent and each worker toils 40 hours per week for four weeks each month. LO17.6 Now consider the employer’s total costs. These include the equipment costs as well as a normal profit of $50 per acre. If the firm pays workers the minimum wage of $6.20 per hour, what will the firm’s economic profit or loss be per acre? At what value would the minimum wage have to be set so that the firm would make zero economic profit from employing an additional low-skilled worker to clear woodland?arrow_forwardSuppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that fixed cost is $130, marginal cost of each worker hired is constant at $40, and the average total cost when three workers are hired is $50. What is the output when three workers are hired? O 20 120 150arrow_forwardThe following labor market graph applies to questions 13-16. Consider the following competitive labor market situation before and after a tax is levied on labor suppliers. (This would be as if the companies did not withhold any taxes from workers' paychecks. The workers would always be the ones mailing in any taxes owed on their pay from the firms.) W wd Wo Ws Imp E L L₁ Lo D(no tax) D. (with tax) L 13. Before the tax is imposed, firms' surplus is given by the area A + B + C. This surplus measures O the workers' addition to profit. O how much the firm is paying the workers. O how much more the workers are getting paid compared the combined minima the workers are willing to work for. O the firms' combined revenues. O the size of the wage.arrow_forward
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