At the given wage and price level, Live Happley should hireSuppose that the price of strawberries increases to $16 per pound, but the wage rate remains at$170.On the previous graph, use the purple points (diamond symbol) to plot Live Happley's labordemand curve when the output price is $16 per pound.Now Live Happley should hirewhen the output price is $16 per pound.Assuming that all strawberry-producing firms have similar production schedules, an increase in theprice of strawberries will cause the* strawberry pickers toSuppose that wages increase to $200 due to an increased demand for workers in this market.Assuming that the price of strawberries remains at $16 per pound, Live Happley will now hire Consider Live Happley Fields, a small player in the strawberry business whose production has noindividual effect on wages and prices. Live Happley's production schedule for strawberries is givenin the following table:LaborOutput(Number of workers) (Pounds of strawberries)1183434846070Suppose that the market wage for strawberry pickers is $170 per worker per day, and the price ofstrawberries is $12 per pound.On the following graph, use the blue points (circle symbol) to plot Live Happley's labor demandcurve when the output price is $12 per pound.Note: Remember to plot each point between the two integers. For example, when the number ofworkers increases from 0 to 1, the value of the marginal product of for the first worker should beplotted with a horizontal coordinate of 0.5, the value halfway between 0 and 1. Line segments willautomatically connect the points.Demand P=$12210Demand P=$1619012020LABOR (Number of workera)ueuoM Jad seyog) 3oV

Value of Marginal Product of Labor (VMPL) is the revenue derived from the additional product produced when an additional unit of labor or labor hour is employed and used in the production process. Given,Market wage, per worker per dayThe marginal product of labor (MPL) is calculated using the formula:The Value of Marginal Product of Labor (VMPL) is calculated using the formula:So, the following table is filled with marginal product for labor, marginal revenue product for labor for strawberry prices of both $12 per pound and $16 per pound:Labor (L)(Number of workers)Output (Q)(Pounds of strawberries)Marginal Product of Labor (MPL)Value of Marginal Product of Labor (VMPL)(P=$12)Value of Marginal Product of Labor (VMPL)(P=$16)00------------1181821628823416192256348141682244601214419257010120160Table 1.So, the demand curve is the same as the Value of the Marginal Product of Labor (VMPL). So, the demand curves for the two different prices ($12 per pound and $16 per pound) are plotted using the VMPL values for the two prices respectively. So, the demand curves are plotted below:Figure 1.The demand curve for labor when the price of a strawberry is $12 per pound is shown by the curve DD and when the price of a strawberry is $16 per pound is shown by the curve DD'.Hiring is optimized when VMPL is equal to or greater than the wage rate that is the additional revenue brought about by the hiring of one additional worker should be greater than or equal to the wage rate.(1) If the wage rate is $170 and the price is $12 per pound, then, from Table 1,At L=2, VMPL is $192 which is greater than the wage rate but when L=3, VMPL is $168 which is less than the wage rate. Therefore, the number of workers hired will be 2 workers.(2) If the wage rate is $170 and the price is $16 per pound, then, from Table 1,At L=4, VMPL is $192 which is greater than the wage rate but when L=5, VMPL is $160 which is less than the wage rate. So, the number of workers hired will be 4 workers.A rise in price of strawberries will cause the demand for strawberry pickers to rise as shown by the upward shift of the demand curve for labor from DD to DD' when the price of strawberries increases from $12 per pound to $16 per pound.(3) If the wage rate is $200 and the price is $16 per pound, then, from Table 1,At L=3, VMPL is $224 which is greater than the wage rate but when L =4, VMPL is $192 which is less than the wage rate. So, the number of workers hired will be 3 workers.The demand curves are plotted in Figure 1.At a price level of $12 and a wage rate of $170, 2 workers will be hired.At a price level of $16 and a wage rate of $170, 4 workers will be hired.A rise in price of strawberries will cause the demand for strawberry pickers to rise.At a price level of $16 and a wage rate of $200, 3 workers will be hired.

Business

Economics

revious graph, use the purple points (diamond symbol) to plot Live Happley's curve when the output price is $16 per pound. e Happley should hire when the output price is $16 per pou g that all strawberry-producing firms have similar production schedules, an inc strawberries will cause the strawberry pickers to that wages increase to $200 due to an increased demand for workers in this r g that the price of strawberries remains at $16 per pound, Live Happley will no

revious graph, use the purple points (diamond symbol) to plot Live Happley's curve when the output price is $16 per pound. e Happley should hire when the output price is $16 per pou g that all strawberry-producing firms have similar production schedules, an inc strawberries will cause the strawberry pickers to that wages increase to $200 due to an increased demand for workers in this r g that the price of strawberries remains at $16 per pound, Live Happley will no

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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