MICROECONOMICS-CONNECT PLUS ACCESS
21st Edition
ISBN: 9781260430776
Author: McConnell
Publisher: MCG
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Chapter 18, Problem 1RQ
To determine
Determining land rent with the help of demand – supply model.
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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…
Label each of the following behaviors with the correct bias or heuristic. LO8.3 a. Your uncle says that he knew all along that the stock market was going to crash in 2008. b. When Fred does well at work, he credits his intelligence. When anything goes wrong, he blames his secretary. c. Ellen thinks that being struck dead by lightning is much more likely than dying from an accidental fall at home. d. The sales of a TV that is priced at $999 rise after another very similar TV priced at $1,300 is placed next to it at the store. e. The sales of a brand of toothpaste rise after new TV commercials announce that the brand “is preferred by 4 out of 5 dentists.”
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?…
Chapter 18 Solutions
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- (Last Word) The combined cost of Social Security and Medicare programs was what percent of U.S. GDP in 2008 (A) 7.6 (B) 12.4 (C) 17.2 (D) 2.9arrow_forwardSuppose demand and supply are given by: (LO3, LO4)Qx d = 14 − 1/2Px and Qx s = 1/4Px − 1c. How much tax revenue does the government earn with the $12 tax when the new equilibrium quantity is 2 units after tax .arrow_forwardSuppose 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_forward
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