Suppose that a car dealership wishes to see if efficiency wages will help improve its salespeople’s productivity. Currently, each salesperson sells an average of 2 cars per day while being paid $22 per hour for an 8-hour day. Instructions: Enter your answers as a whole number. Only do B,C,D a. What is the current labor cost per car sold? $ 88 b. Suppose that when the dealer raises the price of labor to $32 per hour, the average number of cars sold by a salesperson increases to 4 per day. What is now the labor cost per car sold? $ ________ By how much is it higher or lower than it was before? Higher/ Lower by $ _______ Has the efficiency of labor expenditures by the firm (cars sold per dollar of wages paid to salespeople) increased or decreased? Decrease/ Increade c. Suppose that if the wage is raised a second time to $43 per hour, the number of cars sold rises to an average of 5 per day. What is now the labor cost per car sold? $ _______ d. If the firm’s goal is to maximize the efficiency of its labor expenditures, which of the three hourly salary rates should it use: $22 per hour, $32 per hour, or $43 per hour? $ ______ per hour
Suppose that a car dealership wishes to see if efficiency wages will help improve its salespeople’s productivity. Currently, each salesperson sells an average of 2 cars per day while being paid $22 per hour for an 8-hour day.
Instructions: Enter your answers as a whole number.
Only do B,C,D
a. What is the current labor cost per car sold?
$ 88
b. Suppose that when the dealer raises the price of labor to $32 per hour, the average number of cars sold by a salesperson increases to 4 per day. What is now the labor cost per car sold?
$ ________
By how much is it higher or lower than it was before?
Higher/ Lower by $ _______
Has the efficiency of labor expenditures by the firm (cars sold per dollar of wages paid to salespeople) increased or decreased?
Decrease/ Increade
c. Suppose that if the wage is raised a second time to $43 per hour, the number of cars sold rises to an average of 5 per day. What is now the labor cost per car sold?
$ _______
d. If the firm’s goal is to maximize the efficiency of its labor expenditures, which of the three hourly salary rates should it use: $22 per hour, $32 per hour, or $43 per hour?
$ ______ per hour
e. By contrast, which salary maximizes the productivity of the car dealer’s workers (cars sold per worker per day)?
$______ per hour
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