Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 10, Problem 4.2P
To determine
Income inequality.
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The Zippy Paper Company has no control over either the price of paper or the wage it pays its workers. The following table shows the relationship
between the number of workers Zippy hires, total output, marginal product, and marginal revenue product of labor, with all other inputs being held
constant. Assume that the selling price is $10 per box of paper.
Labor Input
Total Output
Marginal Product
Marginal Revenue Product
Price =
$10
(Workers per day)
(Boxes of paper per day)
(Boxes of paper per day)
(Dollars)
0
0
14
2
26
36
44
5
50
AAAAAA
14
$140
12
$120
10
$100
8
$80
64
$60
$40
6
54
If the wage rate is $50.00 per day, Zippy will hire
workers.
Suppose that the workers in this industry have unionized and have collectively bargained for a wage of $70.00.
As a result of this collective bargaining agreement, Zippy will
the number of workers it hires to hire
workers.
The Zippy Paper Company has no control over either the price of paper or the wage it pays its workers. The following table shows the relationship between the number of workers Zippy hires and total output:
Labor Input (workers per day)
Total Output (boxes of paper per day)
0
0
1
15
2
27
3
36
4
43
5
48
6
51
Assuming the selling price is $10 per box, answer the following questions:
What is the marginal revenue product (MRP) of each worker?
How many workers will Zippy hire if the wage rate is $100 per day?
How many workers will Zippy hire if the wage rate is $75 per day?
Assume the wage rate is $75 per day and the price of a box of paper is $20. How many workers will Zippy hire?
Profit maximization Suppose that the market wage for blueberry pickers is $80 per worker per day, and the price of blueberries is $15 per pound.
On the following graph, use the blue points (circle symbol) to plot Blewitt's labor demand curve when the output price is $15 per pound.
Note: Remember to plot each point between the two integers. For example, when the number of workers increases from 0 to 1 , the value of the
marginal product of for the first worker should be plotted with a horizontal coordinate of 0.5 , the value halfway between 0 and 1 . Line segments will
automatically connect the points.
At the given wage and price level, Blewitt's should hire At the given wage and price level, Blewitt's should hire
Suppose that the price of blueberries increases to $18 per pound, but the wage rate remains at $80.
On the previous graph, use the purple points (diamond symbol) to plot Blewitt's labor demand curve when the output price is $18 per pound.
Now Blewitt's…
Chapter 10 Solutions
Principles of Economics (12th Edition)
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- Ab 9 Economicsarrow_forwardAssuming that the price of grapes is $3 per flat, use the data in Problem 3 to calculate total revenue and marginal revenue product (MRP) and graph the MRP curve. How many pickers will be hired if the going wage rate is $9 per hour?arrow_forwardThe Zippy Paper Company has no control over either the price of paper or the wage it pays itsworkers. The following table shows the relationship between the number of workers Zippy hiresand total output: Assuming the selling price is $10 per box, answer the following questions:a. What is the marginal revenue product (MRP) of each worker?b. How many workers will Zippy hire if the wage rate is $100 per day?c. How many workers will Zippy hire if the wage rate is $75 per day?d. Assume the wage rate is $75 per day and the price of a box of paper is $20. How manyworkers will Zippy hire?arrow_forward
- 1. The demand for labor Consider Live Happley Fields, a small player in the strawberry business whose production has no individual effect on wages and prices. Live Happley's production schedule for strawberries is given in the following table: Labor Input Total Output (Number of workers) (Pounds of strawberries) 0 WAGE RATE (Dollars per worker) 300 Suppose that the market wage for strawberry pickers is $170 per worker per day, and the price of strawberries is $12 per pound. 270 On the following graph, use the blue points (circle symbol) to plot Live Happley's labor demand curve when the output price is $12 per pound. Note: Remember to plot each point between the two integers. For example, when the number of workers increases from 0 to 1, the marginal revenue product of the first worker should be plotted with a horizontal coordinate of 0.5, the value halfway between 0 and 1. Line segments will automatically connect the points. 240 210 180 150 120 90 60 30 1 0 2 3 4 5 0 0 18 34 48 60 70…arrow_forwardIn a competitive labor market, the demand for and supply of labor determine the equilibrium wage rate and the equilibrium level of employment. Discuss the relationship between how these markets determine the wage rate and the quantity of labor that should be employed. Share an example, beyond your textbook, that demonstrates this relationshiparrow_forwardThe following table shows the total output each week of workers on a perfectly competitive cherry farm. The equilibrium price of a pound of cherries is $4. Complete the Marginal Product of Labor and the Marginal Revenue Product of Labor columns in the table. Then, using the table, answer the following questions. How many workers will the farmer hire if the equilibrium wage rate is: a. $550 per week? b. $650 per week? Quantity of Labor Marginal Product of Labor Value of Marginal Product of Labor Total Output 1 250 250 1000 600 350 1400 3 900 300 1200 4 1,125 1,300 1,450 1,560 225 900 175 700 150 600 7 110 440arrow_forward
- Assume that the accounting and actuarial industries employ people with similar skills. Suppose a decrease in the demand for actuaries leads to a fall in their wages, while the demand for accountants remains the same. The following graph shows the labor market for accountants in the United States. Show the effect of the fall in demand for actuaries on the U.S. labor market for accountants by shifting the labor demand curve, the labor supply curve, or both. WAGE LABOR Supply Demand Demand Supply (?)arrow_forwardWAGE RATE Assume that the accounting and actuarial industries employ people with similar skills. Suppose an increase in the demand for actuaries leads to a rise in their wages, while the demand for accountants remains the same. The following graph shows the labor market for accountants in the United States. Show the effect of the rise in demand for actuaries on the U.S. labor market for accountants by shifting the labor demand curve, the labor supply curve, or both. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. QUANTITY OF LABOR о Supply Demand Demand Supply As a result, the wage rate for U.S. accountants and the level of employment ?arrow_forwardLeadbelly Co. sells pencils in a perfectly competitive product market and hires workers in a perfectly competitive labor market. Assume that the market wage rate for workers is $120 per day. Leadbelly should follow this rule to hire the profit-maximizing amount of labor: Hire workers up to the point where the is $120 per day. At the profit-maximizing level of output, the marginal product of the last worker hired is 40 boxes of pencils per day. The price of a box of pencils is $ The following graphs show the labor market for pencil workers and the labor supply and demand for Leadbelly Co. Suppose some pencil workers switch to jobs in the growing computer industry. Show how this change affects the pencil market by shifting the labor-demand curve, labor-supply curve, or both. Wage 240 216 192 168 144 120 96 72 48 24 0 Pencil Market Quantity of Labor Supply Demand Demand 1T Supplyarrow_forward
- Ian works at an iron smelter in Pittsburgh, the center of iron production in America. Due to the difficulty in measuring the productivity of individual employees, Ian's employer as well as the other iron smelters all pay an efficiency wage. Adjust the wage line on the graph to reflect this situation. What characteristic of efficiency-wage jobs is not supported by the situation shown in the graph? The wage rate will eventually return to the market-clearing level. Efficiency wages result in an increase in the rate of unemployment. Elevated wages serve as an economic incentive to work harder. Efficiency wage jobs result in a surplus of workers at the wage being offered. Wage ($ per hour) Wage Quantity of workers (in thousands) S Oarrow_forwardThe marginal revenue product of labor (MRPL) for an employer is shown in the figure to the right. Suppose the market wage is $8.00 per hour. How many hours of labor should the employer hire? The employer should hire hours of labor. (Enter your response as an integer value.) Marginal revenue product of labor 22- 20- 18- 16- 14- 12- 10- 8- 6- 4- 2- 04 0 1 2 5 7 8 Quantity of labor (hours) 9 W MRPL 10 11 Q Qarrow_forwardECON 122: Short Writing Assignment #3 Suppose there are two different labor markets, A and B, each with identical demand for labor curves. If the Supply curves are also identical, draw a graph of each labor market in the space below: Now, assume that Market A's working conditions - for some reason - become much harsher than that for Market B (perhaps they are more dangerous or unhealthy). Illustrate how this development would impact your graph(s) above. What impact would this have on the wages in Market A relative to Market B? How about on total employment in each market? Why?arrow_forward
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