Suppose that low-skilled workers employed in clearing woodland can each clear one acre per month if they are each equipped with a shovel, a machete, and a chainsaw. Clearing one acre brings in $1000 in revenue. Each worker’s equipment costs the worker’s employer $150 per month to rent, and each worker toils 40 hours per week for four weeks each month. a. What is the marginal revenue product of hiring one low-skilled worker to clear woodland for one month? Instructions: Enter a whole number for your answer. $ b. How much revenue per hour does each worker bring in? Instructions: Round your answer to two decimal places. $ c. If the minimum wage were $6.20, would the revenue per hour in part b exceed the minimum wage? If so, by how much per hour? Instructions: Round your answer to two decimal places. $ per hour d. Now consider the employer’s total costs. These include the equipment costs as well as a normal profit of $50 per acre. If the firm pays workers the minimum wage of $6.20 per hour, what will the firm’s economic profit or loss be per acre? Instructions: Enter a whole number for your answer. Enter profit or loss as a positive number. The firm’s per acre will be $ . e. At what value would the minimum wage have to be set so that the firm would make zero economic profit from employing an additional low-skilled worker to clear woodland? Instructions: Enter a whole number for your answer. $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that low-skilled workers employed in clearing woodland can each clear one acre per month if they are each equipped with a shovel, a machete, and a chainsaw. Clearing one acre brings in $1000 in revenue. Each worker’s equipment costs the worker’s employer $150 per month to rent, and each worker toils 40 hours per week for four weeks each month.

a. What is the marginal revenue product of hiring one low-skilled worker to clear woodland for one month?

Instructions: Enter a whole number for your answer.

$

b. How much revenue per hour does each worker bring in?

Instructions: Round your answer to two decimal places.

$

c. If the minimum wage were $6.20, would the revenue per hour in part b exceed the minimum wage?

If so, by how much per hour?

Instructions: Round your answer to two decimal places.

$  per hour

d. Now consider the employer’s total costs. These include the equipment costs as well as a normal profit of $50 per acre. If the firm pays workers the minimum wage of $6.20 per hour, what will the firm’s economic profit or loss be per acre?

Instructions: Enter a whole number for your answer. Enter profit or loss as a positive number.

The firm’s           per acre will be $  .

e. At what value would the minimum wage have to be set so that the firm would make zero economic profit from employing an additional low-skilled worker to clear woodland?

Instructions: Enter a whole number for your answer.

$

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