2. Chicken Hut faces perfectly elastic demand for chicken dinners at a price of $6 per dinner. The Hut also faces an upward sloped labor supply curve of E = 10w - 60, where E is the number of workers hired each hour and w is the hourly wage rate. Thus, the Hut faces an upward sloped marginal cost of labor curve of MCE = 6 + 0.2E. Each hour of labor produces 5 dinners. How many workers should Chicken Hut hire each hour to maximize profits? What wage will Chicken Hut pay? Draw a graph to show your results.
2. Chicken Hut faces perfectly elastic demand for chicken dinners at a price of $6 per dinner. The Hut also faces an upward sloped labor supply curve of E = 10w - 60, where E is the number of workers hired each hour and w is the hourly wage rate. Thus, the Hut faces an upward sloped marginal cost of labor curve of MCE = 6 + 0.2E. Each hour of labor produces 5 dinners. How many workers should Chicken Hut hire each hour to maximize profits? What wage will Chicken Hut pay? Draw a graph to show your results.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:2. Chicken Hut faces perfectly elastic demand for chicken dinners at a price of $6 per dinner. The Hut
also faces an upward sloped labor supply curve of
E = 10w – 60,
where E is the number of workers hired each hour and w is the hourly wage rate. Thus, the Hut faces
an upward sloped marginal cost of labor curve of
MCE = 6 + 0.2E.
Each hour of labor produces 5 dinners. How many workers should Chicken Hut hire each hour to
maximize profits? What wage will Chicken Hut pay? Draw a graph to show your results.
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