Microeconomics - With Connect Plus Access
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ISBN: 9781259660849
Author: McConnell
Publisher: MCG
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Chapter 14, Problem 4DQ
To determine
Quantity of resource.
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Discuss the impact of the following factors on the optimal method of procuring an input. (LO1, LO3) a. Benefits from specialization. b. Bureaucracy costs. c. Opportunism on either side of the transaction. d. Specialized investments. e. Unspecifiable events. f. Bargaining costs.
. 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?…
A firm produces output (y) using two inputs, labor (L) and capital (K), according to the following Cobb-Douglas production function:
y = f(L, K) = Lº25 K0.75.
Assuming that we draw the isoquant map with labor on the horizontal axis and capital on the vertical axis, what is the slope of this firm's isoquant when L = 120 and K = 60? Give your answer to two decimal places and remember that the sign matters when describing the slope of an isoquant.[_____________]
Part 2 : See Hint Assume that L = 120 and K = 60 and suppose that the firm decides to reduce its use of capital and replace those machine hours with some additional labor hours. Approximately how many labor hours will the firm need to add for each machine hour it cut in order to maintain the same level of output (i.e., stay on the same isoquant)? Give your answer to two decimal places. [__________] labor hours
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- 32. Assuming labor is the only cost for production, a firm hires labor up to the point at which the wage equals (i) the value of the marginal product of labor, (ii) the marginal cost of an additional unit of output, (iii) output price multiplied by the marginal product of labor, for maximum profit. O (i) and (iii) only O (i) and (ii) only (ii) and (iii) only O (i), (ii), and (iii)arrow_forwardAn economist estimated that the cost function of a single-product firm isC(Q) = 100 + 20Q + 15 Q^2+ 10 Q^3Based on this information, determine: (LO4, LO5)a. The fixed cost of producing 10 units of output.arrow_forwardComplete the following labor supply table for a firm hiring labor competitively: LO17.2 Show graphically the labor supply and marginal resource (labor) cost curves for this firm. Are the curves the same or different? If they are different, which one is higher? Plot the labor demand data of review question 2 in Chapter 16 on the graph used in part a above. What are the equilibrium wage rate and level of employment?arrow_forward
- Why would a firm be happy to earn zero economic profits? Because zero economic profit means that the firm earns Select one.O. enough in total revenues to pay for all the fixed cost and some but not all of the variable costs.O. enough in total revenues to pay for all the accounting costs but none of the opportunity costs.O. zero accounting profit.O. enough in total revenues to pay for all the accounting costs and all of the opportunity costs.arrow_forward4. 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_forwardIn the short run, the marginal cost of the first unit of output is $25, the marginal cost of producing producing the third unit of output is $14. The firm's total variable cost of producing three units of O a. $39. O b. $25 O c. $33.. O d. $57.arrow_forward
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