Answered: l.C<ldbelly Co. sells pencils in a…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter16: The Markets For Labor, Capital, And Land

Section: Chapter Questions

Problem 8P

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Question

l.C<ldbelly Co. sells pencils in a perfectly competitive
product market and hires workers in a perfectly competitive
labor matkct. Assume that the market \\'age rate for
workers is $150 per day.
a. What rule should Lead belly follow to hire the
profit-maximizing amount of Labor?
b. At the profit-maximizing level of output, the marginal
product of the last worker hired is 30 boxes
of pencils per day. Calculate the p rice of a box of
pencils.
c. Uraw a diagram of the labor market for pencil workers
(as in Figure 4 of this chapter) next to a diagram
of the labor supply and demand for Lcadbelly Co. (as
in Figure 3). Label the equilibrium wage and quantity
of labor for both the market and the firm. H0\\1 are
these diagrams related?
d. Suppose some pencil workers switch to jobs in the
growing computer industry. On the side-by--side
diagrams fmm part (c), show how this change
affects the equilibrium wage and quantity of Labor
for both the pencil market and lor Leadbelly. How
docs this change affect the marginal product of labor
at Lcadbelly?

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