Microeconomics - With Connect Plus Access
20th Edition
ISBN: 9781259660849
Author: McConnell
Publisher: MCG
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Chapter 14, Problem 3DQ
To determine
Elasticity of resource demand determinants.
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Will the equilibrium price of orange juice increase or decrease in each of the following situations? LO7a.
A medical study reporting that orange juice reduces cancer is released at the same time that a freak storm destroys half of the orange crop in Florida.
The prices of all beverages except orange juice fall in half while unexpectedly perfect weather in Florida results in an orange crop that is 20 percent larger than normal.
Suppose demand and supply are given by: (LO3, LO4)Qx d = 14 − 1/2Px and Qx s = 1/4Px − 1a. Determine the equilibrium price and quantity.
ADVANCED ANALYSIS Assume that demand for a commodity is represented by the equation P=75−2Qd.P=75−2Qd.Supply is represented by the equation P=−15+4Qs,P=−15+4Qs,where Qd and Qs are quantity demanded and quantity supplied, respectively, and P is price.Instructions: Round your answer for price to 2 decimal places and enter your quantity as a whole number.a. Using the equilibrium condition Qs = Qd, determine equilibrium price.
b. Now determine equilibrium quantity.
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- 4. Suppose that low-skilled workers employed in clearing woodland can each clear one acre per month if each is equippedwith a shovel, a machete, and a chainsaw. Clearing one acrebrings in $1,000 in revenue. Each worker’s equipment coststhe worker’s employer $150 per month to rent and each workertoils 40 hours per week for four weeks each month. LO17.6 a. What is the marginal revenue product of hiring one lowskilled worker to clear woodland for one month?b. How much revenue per hour does each worker bring in?c. If the minimum wage were $6.20, would the revenue perhour in part b exceed the minimum wage? If so, by howmuch per hour?d. Now consider the employer’s total costs. These includethe equipment costs as well as a normal profit of $50 peracre. If the firm pays workers the minimum wage of$6.20 per hour, what will the firm’s economic profit orloss be per acre?e. At what value would the minimum wage have to be set sothat the firm would make zero economic profit fromemploying an…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_forwardSubscribing to the theory that life is indeed a beach, the residents of La Playa spend all of their money on three things: Every year, they collectively buy 250 bathing suits, 600 tubes of sunscreen, and 400 beach towels. Using the data in Table 8P - 1 , calculate the following . [LO 8.1] a. The total cost of this basket each year 2013 through . b. How much the price of this basket has changed from year to year in percentage terms. threearrow_forward
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- DVANCED ANALYSIS Assume that demand for a commodity is represented by the equation P=80−2Qd.�=80−2��.Supply is represented by the equation P=−20+2Qs,�=−20+2��,where Qd and Qs are quantity demanded and quantity supplied, respectively, and P is price.Instructions: Round your answer for price to 2 decimal places and enter your answer for quantity as a whole number. Using the equilibrium condition Qs = Qd, solve the equations to determine equilibrium price and equilibrium quantity. Equilibrium price = $ Equilibrium quantity = unitsarrow_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_forwardConsider 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?arrow_forward
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