LABOR ECONOMICS (LL+ACCESS)
8th Edition
ISBN: 9781264909339
Author: BORJAS
Publisher: MCG
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Question
Chapter 5, Problem 14P
To determine
Determine the compensating differential between the two firms.
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A craft chocolate producer considers hiring one extra worker in production. Currently, the shop is selling 200 chocolate bars per day at a price of $6. With one extra worker, the manager estimates that they would be able to increase the output to 250 chocolate bars per day and that they would need to lower the price to $5.50 in order to sell them. The daily salary of this new employee would be the same as for the existing ones: $150. What should the manager do?
Group of answer choices
Reduce the number of workers working in his chocolate place
Increase its selling price
Turn down the new worker and maintain the same number of employees
Increase the salary of all employees
Hire the extra worker
Ian works at an iron smelter in Pittsburgh, the center of iron
production in America. Due to the difficulty in measuring
the productivity of individual employees, Ian's employer as
well as the other iron smelters all pay an efficiency wage.
Adjust the wage line on the graph to reflect this situation.
What characteristic of efficiency-wage jobs is not
supported by the situation shown in the graph?
The wage rate will eventually return to the
market-clearing level.
Efficiency wages result in an increase in the rate
of unemployment.
Elevated wages serve as an economic incentive to
work harder.
Efficiency wage jobs result in a surplus of workers at
the wage being offered.
Wage ($ per hour)
Wage
Quantity of workers (in thousands)
S
O
Klee Motors is a small car leadership. On average, it sells a car for $24 000, which it purchases from their manufacturer for $20 000. Each month, Klee Motors pay $60 000 in rent and utilities and $60 000 in sales people's salaries. In addition to their salaries, sales people are paid a commission of $500 for each car they sell. Klee Motor also spends $15 000 each month on local advertisements. How many cars must Klee Motors sell each month to break even? Will Klee Motors earn a profit if it can sell 6 cars? How much sales revenue shall the company earn to achieve a $100 000 profit?
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