Paul is a teenager who makes money washing cars. He has 200 cars he needs to wash each week. His weekly revenue from washing cars is $8,000. If manual car-washing supply kits are used, a worker can wash each car in an hour. If power-washing supply kits are used, a worker can wash each car in 30 minutes. Paul hires other teenagers to help him. Their labor is supplied inelastically at $10 per hour. Each teenager works two hours a day and five days each week.If Paul decides to have his workers use manual supply kits, how many manual supply kits will Paul rent and how many workers will he hire?If he decides to have the workers use power-washing supply kits, how many supply kits will Paul rent and how many workers will he hire?Suppose the weekly rental cost for each manual washing kit is $250 and for each power-washing kit is $700. What type of kit will Paul rent? How many workers will he employ? How much profit will he earn?Suppose the government imposes a 20 percent payroll tax (paid by employers) on all labor and offers a 20 percent subsidy on the rental cost of capital. What equipment will Paul rent? How many workers will he employ? How much profit will he earn?

Given: Number of cars=200 Weekly revenue=$ 8000 Power washing kit time: 30 minutes labor cost=$10…

Answered: Paul is a teenager who makes money…

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter12: The Supply Of And Demand For Productive Resources

Section: Chapter Questions

Problem 7CQ

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Paul is a teenager who makes money washing cars. He has 200 cars he needs to wash each week. His weekly revenue from washing cars is $8,000. If manual car-washing supply kits are used, a worker can wash each car in an hour. If power-washing supply kits are used, a worker can wash each car in 30 minutes. Paul hires other teenagers to help him. Their labor is supplied inelastically at $10 per hour. Each teenager works two hours a day and five days each week.

If Paul decides to have his workers use manual supply kits, how many manual supply kits will Paul rent and how many workers will he hire?
If he decides to have the workers use power-washing supply kits, how many supply kits will Paul rent and how many workers will he hire?
Suppose the weekly rental cost for each manual washing kit is $250 and for each power-washing kit is $700. What type of kit will Paul rent? How many workers will he employ? How much profit will he earn?
Suppose the government imposes a 20 percent payroll tax (paid by employers) on all labor and offers a 20 percent subsidy on the rental cost of capital. What equipment will Paul rent? How many workers will he employ? How much profit will he earn?

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