EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 15, Problem 2RQ
To determine
Perfect competition and monopsony market.
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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?
The table below shows your production function relating output per number of hired workers (assume no changes to the
capital and size of the convenient store.
Use the given information to find the Marginal Product of Labor.
Workers Total Output
0
0
1
2
3
4
LO
5
90
149
182
197
202
Marginal Product
A
OHire a number of workers where marginal product is positive
OHire a number of workers where marginal product is negative
OHire the number of workers where marginal product is maximized
—
←
What should determine the number of workers to hire if your goal is to maximize efficiency?
OHire as many employees as possible
OHire the minimum number of workers
Suppose that the wage rate is $13 per hour and the price of the product is $2. Values for output and labor are in units per hour.
b.
L
0.
24
44
60
72
80
4
84
Find the profit-maximizing quantity of labor. (Assume the firm can hire up to 6 workers.)
The profit-maximizing quantity of labor is worker(s). (Enter a numeric response using an integer.)
Suppose that the price of the product remains $2 but that the wage rate increases to $36. Find the new profit maximizing level of L
The profit-maximizing quantity of labor is
worker(s).
Suppose that the price of the product decreases to $1 and the wage remains at $13 per hour. Find the new profit-maximizing L.
Chapter 15 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
Ch. 15.3 - Prob. 1QQCh. 15.3 - Prob. 2QQCh. 15.3 - Prob. 3QQCh. 15.3 - Prob. 4QQCh. 15.A - Prob. 1ADQCh. 15.A - Prob. 2ADQCh. 15.A - Prob. 3ADQCh. 15.A - Prob. 4ADQCh. 15.A - Prob. 5ADQCh. 15.A - Prob. 1ARQ
Ch. 15.A - Prob. 2ARQCh. 15.A - Prob. 3ARQCh. 15.A - Prob. 4ARQCh. 15.A - Prob. 1APCh. 15.A - Prob. 2APCh. 15 - Prob. 1DQCh. 15 - Prob. 2DQCh. 15 - Prob. 3DQCh. 15 - Prob. 4DQCh. 15 - Prob. 5DQCh. 15 - Prob. 6DQCh. 15 - Prob. 7DQCh. 15 - Prob. 8DQCh. 15 - Prob. 9DQCh. 15 - Prob. 10DQCh. 15 - Prob. 1RQCh. 15 - Prob. 2RQCh. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Prob. 1PCh. 15 - Prob. 2PCh. 15 - Prob. 3PCh. 15 - Prob. 4PCh. 15 - Prob. 5P
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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_forwardConsider an individual who was employed prior to having a child. Now, they face daycare costs (M) if they choose to go back to work. Assume that they earn an hourly wage (W) and their non-labour income (YN) is greater than their daycare costs (YN > M). Despite the daycare costs, this individual chooses to work T-Lo hours per week. Draw a graph that reflects this individual's income- leisure constraint (both with and without daycare costs), utility-maximizing indifference curve (Uo) and choice of leisure hours (Lo).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_forward
- 5 MC Qu. 16-35 (Algo) Refer to the given table.... Employment 0 1 2 3 4 S 6 Multiple Choice O O Total Product 0 Refer to the given table. If the firm is hiring workers under purely competitive conditions at a wage rate of $38, it will employ O O 12 22 30 36 40 42 Tworker 2 workers. 3 workers Product Price $5 Sworkers 5 5 5 5 5 5 0arrow_forwardA 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.arrow_forwardIf, 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_forward
- Question 14 Human capital is H-e0.07*5), where S is the number of years of schooling. What is the ratio of the productivities of the persons having 9 and 12 years of schooling, respectively. Hint: This will be the ratio of their wages in the competitive labor ratio of their wages in the competitive labor market. O 0.81 0.95 O 1.03 O 1.54arrow_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_forwardYou 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 workerarrow_forward
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