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Economics: Principles & Policy
14th Edition
ISBN: 9781337912679
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning US
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Question
Chapter 18, Problem 4DQ
To determine
The factors that determining the wages.
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Students have asked these similar questions
Answer the given question with a proper explanation and step-by-step solution.
Consider the Labor Economics Question. This will provide insight into the idea of the optimal number of workers and the value of the marginal product of labor.
If wages in the restaurant is $16.80 per hour and the price of a Hamburger is $4.20 and the production function for the workers is:
Q = 6L – 0.25L2^2
a. How many workers should Your Restaurant employ during the lunch hour to maximize profits?
(note—the value of the marginal product of labor and the marginal revenue product are the same)
We maximize profits which are total revenues less total costs:
b. Compute the maximum profit at Your Restaurant. (note—consider that profit involves Total Revenue and Total Costs).
c. Compute the profit created if You hire an additional worker. Explain why it is or is not profit maximizing to hire an additional worker.
d. Suppose instead that You wants to keep the lines as short as possible by maximizing production.…
Your enterprising uncle opens a sandwich shop that employs 7 people. The employees are paid $6 per hour, and a sandwich sells for $3. If your uncle is maximizing his profit, what is the value of the marginal product of the last worker he hired? What
is that worker's marginal product?
Explain why labor productivity and real hourly compensation track so closely over time.
Chapter 18 Solutions
Economics: Principles & Policy
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