The first is a (human) worker, who must be paid $18 for each hour they spend producing chairs. The second is a robot, that costs $15 of inputs (including electricity and maintenance) for each hour it works. Assume that the sale price of chairs is always sufficiently high that it is profitable to fulfill this 80-chair order. The firm needs to make 80 chairs to fulfill its order. Assume also that the firm is profit maximizing (& therefore cost minimizing). Now suppose that the local economy increases the minimum wage, and the price of an hour of a worker’s time increases from $18 to $27. 1) What does the principle of substitution say should happen to the firm’s use of (i) worker hours and (ii) robot hours? Pls show full calculations
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The first is a (human) worker, who must be paid $18 for each hour they spend producing chairs. The second is a robot, that costs $15 of inputs (including electricity and maintenance) for each hour it works.
Assume that the sale
80-chair order. The firm needs to make 80 chairs to fulfill its order. Assume also that the firm is
profit maximizing (& therefore cost minimizing).
Now suppose that the local economy increases the minimum wage, and the price of an hour of
a worker’s time increases from $18 to $27.
1) What does the principle of substitution say should happen to the firm’s use of (i) worker
hours and (ii) robot hours?
Pls show full calculations
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