Loose Leaf for Microeconomics
20th Edition
ISBN: 9780077660901
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 14, Problem 4P
To determine
The marginal product of labor and the marginal product of capital.
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A software company in Silicon Valley uses programmers (labor) and computers (capital) to produce apps for mobile devices. The firm estimates that when it comes to labor, MPL = 5 apps per month while PL = $1,000 per month. And when it comes to capital, MPC = 8 apps per month while PC = $1,000 per month. If the company wants to maximize its profits, it should: LO16.5 a. Increase labor while decreasing capital. b. Decrease labor while increasing capital. c. Keep the current amounts of capital and labor just as they are. d. None of the above.
. 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?…
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?
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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_forwardWhich of the following are short-run and which are long-run adjustments? LO9.1 a. Wendy’s builds a new restaurant. b. Harley-Davidson Corporation hires 200 more production workers. c. A farmer increases the amount of fertilizer used on his corn crop. d. An Alcoa aluminum plant adds a third shift of workers.arrow_forwardAverage total cost tells us the O 1) cost of the last unit of output, if total cost does not include a fixed cost component. 2) variable cost of a firm that is producing at least one unit of output. 3) O 4) total cost of the first unit of output, if total cost is divided evenly over all th units produced. cost of a typical unit of output, if total cost is divided evenly over all the uni produced.arrow_forward
- Linda sells 100 bottles of homemade ketchup for $10 each. The cost of the ingredients, the bottles, and the labels was $700. In addition, it took her 20 hours to make the ketchup and to do so she took time off from a job that paid her $20 per hour. Linda’s accounting profit is while her economic profit is. LO9.1 a. $700; $400 b. $300; $100 c. $300; negative $100 d. $1,000; negative $1,100arrow_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_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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