Econ Micro (book Only)
Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
Question
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Chapter 12, Problem 1P
To determine

To calculate the total hours per week and the reasons quantity supplied increases with the hourly wage and the individuals who have a backward bending supply curve and whether the market supply curve would bend backwards in the table shown below.

Concept Introduction:

Wage rates: The amount of base wage paid to a worker per hour or day or per unit of output if on piecework

Market supply curve: this is an upward sloping curve depicting the positive relationship between price and quantity supplied

Expert Solution & Answer
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Explanation of Solution

From the data given in the table, we can determine the total hours of labor hours supplied by,

Hourly wage $ Q1 Q2 Q3 QT
15 20 0 0 35
16 25 0 0 41
17 35 10 0 62
18 45 25 10 98
19 42 40 30 131
20 38 37 45 140

Here, the quantity supplied will tend to increase with an increase in the hourly wage because every additional unit of labor supplied will now earn more than the earlier level.

To understand the backward bending nature of labor supply, we see that the individuals Q1 and Q2will show a backward bending supply curve in the range shown as we can clearly see that with an increase in the hourly wage after a point, there is a reduction in the hours of work performed.

The market supply of labor does not show a backward bending supply curve of labor which can be assessed from the column QT.

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17) (OUP-U6-Q14) The figure depicts the isocost lines of a firm. Which of the following statements is correct? Effort per hour 0.9 0.7 0.6 0.45 0 0 Isocost A 13 10 Hourly wage, S Isocost B 20 Isocost C (A) The cost of production is constant along an isocost line. (B) Isocost A has the lowest cost per unit of effort of the three isocosts. (C) The units of effort per dollar of wage cost for isocost B are 0.45. (D) For the hourly wage of $12, the effort per hour is 0.8 on isocost A.
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