MICROECONMICS (LL) W/ACCESS
21st Edition
ISBN: 9781260236569
Author: McConnell
Publisher: MCG
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Chapter 16, 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
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