Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 16, Problem 2RQ
To determine
The number of workers that can be hired by the firm.
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. 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?…
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LO
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WAGE
7. Shifts in labor supply
Assume that the consulting and information technology industries employ people with similar skills. Suppose an increase in the demand for computer
analysts leads to a rise in their wages, while the demand for consultants remains the same.
The following graph shows the labor market for consultants in the United States.
Show the effect of the rise in demand for computer analysts on the U.S. labor market for consultants by shifting the labor demand curve, the labor
supply curve, or both.
Supply
Demand
Supply
Demand
LABOR
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You are an employer seeking to fill a vacant position on an assembly line. Are you more concemed with the average product of labor or the marginal product of labor
for the last person hired?
O A. The marginal product of labor because to maximize profits, you will want to hire labor up to but not exceeding the point where labor begins to experience
diminishing marginal returns.
O B. The average product of labor because productivity is maximized when average product is maximized This determines the output where revenue and profit
are maximized.
O C. The average product of labor because to maximize profits, you will want to hire labor up to but not exceeding the point where labor begins to experience
diminishing marginal returns
O D. The marginal product because it measures the effect the last person hired has on output, or total product. This helps determine the revenue generated by
hiring an another worker, which can be compared with the cost of hiring an another worker
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- Employment 0 1 2 3 4 5 6 Labor Demand Data Total Product 0 15 28 о Multiple Choice о O $18 $17 39 48 55 60 $15 $16 Product Price $2.20 2.00 1.80 1.60 1.40 1. 20 1.00 The table shows labor demand data on the left and labor supply data on the right. What will be the profit-maximizing wage rate? Labor Supply Data Employment 0 1 2 3 4 LO 5 6 Wage Rate $15.00 16.00 17.00 18.00 19.00 20.00arrow_forwardSuppose 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_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
- The table below shows a firm that is perfectly competitive in both the labor and product markets, showing how much daily output a firm can produce using various numbers of workers. Number of Workers 1 2 3 4 5 6 Output O $2 O $460 O $115 O $100 O $40 3 9 16 21 23 24 If output sells for $20/unit, what is the marginal revenue product of the 5th worker?arrow_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_forwardFigure 17-2 Marginal revenue product of labor 56 48 40 36 28 20 11 0 O 1 2 3 4 5 Marginal revenue product of labor Quantity of labor Figure 17-2 shows the marginal revenue product for Becca's Baubles, a producer of hand-beaded bracelets. Refer to Figure 17-2. Suppose the market price of bracelets falls to $2. What happens to the curve given in the diagram? O Nothing, because labor's productivity has not changed. There will be a movement along the curve. The curve shifts to the left. C We cannot answer the question without knowing if Becca would want to hire more workers.arrow_forward
- If, by increasing the qulf, by increasing the quantity of labour used by one unit, the firm can give up 2 units of capital and still produce the same output, then the MRTSLK is: antity of labour used by one unit, the firm can give up 2 units of capital and still produce the same output, then the MRTSLK is: O 4 O 1 O 2 O 0.5arrow_forwardThe accompanying table describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour Calls Per Hour 1 2 6 16 O 22 24 What is the total cost of making 2 calls an hour? Multiple Choice O $45 $40 $20 Number of Telephones 1 1 1 1 1 1 $10 Number of Workers Per Hour 2 4 6 8 10 12arrow_forwardElla owns a factory that produces kitchen knives. She has eight employees, with which her factory can produce 120 knives per day. If she hired a ninth employee, she'd be knives. able to produce 130 wheelbarrows per day. Therefore, the marginal product of the ninth employee is O 12 O 10 O 15 O 14 O 11arrow_forward
- General Robotics uses only labour and capital as inputs. Suppose General Robotics' budget for production of gadgets decreased by 20%, causing the company to produce 20% less gadgets. What effect would this development have on this company's demand for labour? O A. 100% scale effect; demand for labour would increase. O B. 100% scale effect; demand for labour would decrease. O C. 100% substitution effect; demand for labour would decrease. O D. 100% substitution effect; demand for labour would increase.arrow_forwardGiving each firm that hires one or more welfare workers a payment of $1.000 per year, irrespective of the number it hires, is likely to be O A. successful because firms hire workers such that the marginal revenue product of labor equals the marginal cost of labor, and this approach reduces the marginal cost of labor by $1,000 per worker, increasing employment O B. successful at increasing employment by one additional worker because firms hire workers such that the marginal revenue product of labor equals the marginal cost of labor, and this approach reduces the marginal cost of labor by $1,000 for the first worker hired. O C. unsuccessful at increasing employment because firms hire workers such that the marginal revenue product of labor equals the marginal cost of labor, and this approach does not affect the marginal cost of labor. O D. successful because firms hire workers such that the marginal revenue product of labor equals the marginal cost of labor, and this approach reduces the…arrow_forwardJill runs a factory that makes lie detectors in Little Rock, Arkansas. This month, Jill's 34 workers produced 690 machines. Suppose Jill adds one more worker and, as a result, her factory's output increases to 700. Jill's marginal product of labor from the last worker hired equals Select one: O a. 20. O b. None of the above answers is correct. O c 690. O d. 700. O e. 10.arrow_forward
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