Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 16, Problem 4DQ
To determine
Quantity of resource.
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Complete 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?
Consider 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?
Ma2.
Required:
Question 3.(LO3 Apply)
Simon Ltd is run by Simon Leather who makes leather belts for designers. He uses the finest Argentinean
leather and needs highly trained machinists to make the belts up to the quality designers expect. His beits usually sell for £50 per item and use 0.2m² of leather and 30 minutes of labor. Simon Ltd has 5 staff. They work a standard 8-hour day, 5 days a week, 48 weeks of the year. They earn £15 per hour.
Leather costs £20 per meter. Simon also has some variable overheads of £6 per unit. Fixed overheads are £28,800.
a) Calculate the number of belts Simon will have to sell to break even.
Simon decides to branch out and start to also sell handbags to the same market. The handbags sell for €250 each and use 1.5m² of leather with 1 hour of labor being required. Variable overheads are £20 per handbag.
There has been a bad case of foot and mouth in Argentina. Simon can only use the leather he has currently being shipped to him for the next…
Chapter 16 Solutions
Economics (Irwin Economics)
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Similar questions
- 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?arrow_forwardA 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 hoursarrow_forwardDiscuss 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.arrow_forward
- 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.arrow_forward32. 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_forward
- In 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_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_forward665 Capital (K) 0 10 Labor (L) O $13.30 O $1.95 O $10.19 O $6.34 317 Please refer to the graph above. Assume that cost is $4,216. What is the capital rental rate? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.arrow_forward
- 3) Suppose that the supply curve for the labour to a firm is given by L = 100W and the marginal expense of labour curve is given by MEL = L/50 where W is the (nominal) market wage. Suppose also that the firm’s demand for labour (marginal revenue product) curve is given by L = 1, 000 − 100MRPL. a) If the firm acts as a monopsonist, how many workers will it hire in order to maximise profits? What wage will it pay? How will this wage compare to the MRPL at this employment level? b) Assume now that the firm must hire its workers in a perfectly competitive labour market. How many workers will the firm hire now? What wage will it pay? c) What is the deadweight loss from the labour market for a monopsonist? Graph your results and show the DW Larrow_forwardO1. What effect would each of the following have on the value of the firm?.(D) The firm is required to install pollution-control equipment.(e) The workforce votes to unionize.(f) The rate of interest rises.(g) The rate of inflation changes.arrow_forwardThe profit function is the same as in Question 40 and 41. Profit =200L+100K-10L^2-20K^2+20KL. After determining the profit-maximizing level of Labor (L) 25 and Capital (K) 15 how much are the profits of the firm at the profit-maximizing levels of L and K? Its not 46!.arrow_forward
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