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 18, Problem 12DQ
To determine
Share of rent, interest, and profit.
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Assume that the productivity of farm labour depends on daily caloric intake, similarly to that depicted in Figure17.4. Using this kind of diagram, compare the efficiency wages that would apply to the following two types of workers:
• A landless labourer
• A labourer with small plot of land on which he
grows staple crops
Describe the likely equilibrium unemployment rates and wage rates for landless labourers and small landholders. Judging partially on the basis of this example, what sorts of data and what empirical strategies might you use to see whether nutritional efficiency wages were an important element in the rural labour markets of poor, rural economies?
. 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?…
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?
Chapter 18 Solutions
Economics (Irwin Economics)
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- PROBLEMS 1. Workers are compensated by firms with “benefits” in addition to wages and salaries. The most prominent benefit offered by many firms is health insurance. Suppose that in 2000, workers at one steel plant were paid $20 per hour and in addition received health benefits at the rate of $4 per hour. Also suppose that by 2010 workers at that plant were paid $21 per hour but received $9 in health insurance benefits. LO17.1 By what percentage did total compensation (wages plus benefits) change at this plant from 2000 to 2010? What was the approximate average annual percentage change in total compensation? By what percentage did wages change at this plant from 2000 to 2010? What was the approximate average annual percentage change in wages? If workers value a dollar of health benefits as much as they value a dollar of wages, by what total percentage will they feel that their incomes have risen over this time period? What if they only consider wages when calculating their incomes?…arrow_forwardConsider 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?arrow_forwardAssume that the labor demand equation for a fictional country is L d =30-w where w is the wage per hour worked and L d is the number of workers demanded by firms. Assume also that the labor supply equation for that country is L s =0.5(w) , where L s is the number of people willing to work . [LO 9.2,9.5] a. Find the equilibrium wage and quantity of labor employed b . At the equilibrium wage , how many people are unemployed ? c. How would the number of unemployed change if the supply of workers increased ?arrow_forward
- 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_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_forwardTable 9P - 2 uses data for the year 2016 , adjusted to be comparable to each other . All population values are in thousands . a . Fill in the bîanks in the table . [LO 9.1 ] b . In part a, you should have found that the unem ployment rates of the three countries differ significantly from one another . Suggest three possible reasons to explain why the countries might have different unemploym country working-age population labor force employed unemployed unemployment rate (%) labor-force participation rate (%) japan 110849 64460 2160 france 31164 3520 56.1 germany 76066 46096 5.7 ent rates .arrow_forward
- 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_forward7 Aggregate labour hours, L, are given by L = 51*(1-t), where 't' is the rate of income tax. The real wage rate is fixed and equal to 1. At what tax rate is tax revenue maximised? State your answer to 2 decimal places.arrow_forwardUsing the data in Table 8P - 3 , calculate the CPI and the inflation rate in each year, using 2010 as a base year . [LO 8.2arrow_forward
- Subscribing to the theory that life is indeed a beach, the residents of La Playa spend all of their money on three things: Every year, they collectively buy 250 bathing suits, 600 tubes of sunscreen, and 400 beach towels. Using the data in Table 8P - 1 , calculate the following . [LO 8.1] a. The total cost of this basket each year 2013 through . b. How much the price of this basket has changed from year to year in percentage terms. threearrow_forwardIn 2008 the price index was calculated at 137.9 with 2003 as the base year. In 2009 the price index increased to 148.7. What was the inflation from 2008-2009? O 7.8% O 7.3% O 10.8%arrow_forward8. Refer to Figure 28-3. If the minimum wage is set at $100, how many will be unemployed? 9. Refer to Figure 28-3. If the minimum wage is equal to $125, what is the quantity of labor supplied, thequantity of labor demanded, and number unemployed? 10. Suppose the interest rate is 5% and that you are to receive three annual payments of $10,000, with the first payment one year from now, the second payment two years from now, and the third payment three years from now. What is the present value of this stream of payments?arrow_forward
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