160 Мarginal Factor Cost Ayddng 88 76 64 52 34 Marginal Revenue Product 16 30 60 80 100 120 140 160 210 240 Quantity 200 of Loggers (a) If the wage rate is $34, state whether there will be a shortage or a surplus of loggers and calculate its size. Show your work. (b) Identify the profit-maximizing number of loggers that Larry's Logging will hire. Explain using the labeling on the graph. (c) Identify the profit-maximizing wage rate that Larry's Logging will pay its loggers, Explain using the labeling on the graph. (d) Assume that the market for loggers becomes perfectly competitive. What wage rate would Larry's Logging pay its loggers if it were a perfectly competitive firm? Explain using the labeling on the graph. (e) Assume instead that Larry's Logging uses both labor and capital in its production of logs. The marginal product of the last unit of labor hired is 150 logs per hour and the marginal product of the last unit of capital rented is 200 logs per hour; the hourly wage rate for labor is $30 and the hourly rental price for capital is $50. To minimize the cost of producing its current level of output, should Larry's Logging hire more loggers, fewer loggers, or the same number of loggers? Explain using marginal analysis. Wage Rate (S)
160 Мarginal Factor Cost Ayddng 88 76 64 52 34 Marginal Revenue Product 16 30 60 80 100 120 140 160 210 240 Quantity 200 of Loggers (a) If the wage rate is $34, state whether there will be a shortage or a surplus of loggers and calculate its size. Show your work. (b) Identify the profit-maximizing number of loggers that Larry's Logging will hire. Explain using the labeling on the graph. (c) Identify the profit-maximizing wage rate that Larry's Logging will pay its loggers, Explain using the labeling on the graph. (d) Assume that the market for loggers becomes perfectly competitive. What wage rate would Larry's Logging pay its loggers if it were a perfectly competitive firm? Explain using the labeling on the graph. (e) Assume instead that Larry's Logging uses both labor and capital in its production of logs. The marginal product of the last unit of labor hired is 150 logs per hour and the marginal product of the last unit of capital rented is 200 logs per hour; the hourly wage rate for labor is $30 and the hourly rental price for capital is $50. To minimize the cost of producing its current level of output, should Larry's Logging hire more loggers, fewer loggers, or the same number of loggers? Explain using marginal analysis. Wage Rate (S)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
PLEASE ONLY ANSWER PARTS A, D, AND E
Transcribed Image Text:160
Мarginal
Factor Cost
Ayddng
88
76
64
52
34
Marginal
Revenue Product
16
30
60 80 100 120 140 160
210 240
Quantity
200
of Loggers
(a) If the wage rate is $34, state whether there will be a shortage or a surplus of loggers and
calculate its size. Show your work.
(b) Identify the profit-maximizing number of loggers that Larry's Logging will hire. Explain
using the labeling on the graph.
(c) Identify the profit-maximizing wage rate that Larry's Logging will pay its loggers, Explain
using the labeling on the graph.
(d) Assume that the market for loggers becomes perfectly competitive. What wage rate would
Larry's Logging pay its loggers if it were a perfectly competitive firm? Explain using the
labeling on the graph.
(e) Assume instead that Larry's Logging uses both labor and capital in its production of logs.
The marginal product of the last unit of labor hired is 150 logs per hour and the marginal
product of the last unit of capital rented is 200 logs per hour; the hourly wage rate for labor
is $30 and the hourly rental price for capital is $50. To minimize the cost of producing its
current level of output, should Larry's Logging hire more loggers, fewer loggers, or the
same number of loggers? Explain using marginal analysis.
Wage Rate (S)
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