Principles of Economics (MindTap Course List)
8th Edition
ISBN: 9781305585126
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 18, Problem 6PA
To determine
Profit maximization.
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Your enterprising uncle opens a sandwich shop that employs 7 people. The employees are paid $6 per hour, and a sandwich sells for $3. If your uncle is maximizing his profit, what is the value of the marginal product of the last worker he hired? What
is that worker's marginal product?
Your enterprising uncle opens a sandwich shop that employs 11 people. The employees are paid $15 per hour, and a sandwich sells for $3.
If your uncle is maximizing his profit, the value of the marginal product of the last worker he hired is
, and that worker's marginal product is
sandwiches per hour.
Suppose Kara maximizes her profits by hiring workers to produce hand-made soaps. Her soaps sell for $1 each. How should Kara decide on how many workers she should hire?
a.Hire workers up to the point when the price of her soaps starts to fall from $1
b.Hire workers up to the point when the total product of all her workers is at its maximum
c.Hire up to the point when the wage rate equals to the value of the marginal product of the last worker hired
d.Hire up to the point when the marginal product of the last worker hired is equal to zero
Chapter 18 Solutions
Principles of Economics (MindTap Course List)
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- A carpenter quits his job at a furniture factory to open his own cabinetmaking business. In his first two years of operation, his sales average $100 000 per year and his operating costs for wood, workshop and tool rental, utilities, and miscellaneous expenses average $70 000 per year. Now his old job at the furniture factory is again available. What is the lowest wage at which he should decide to return to his old job? Why?arrow_forwardClick to see additional instructions Consider a firm that exists for one period. The value of labour's marginal product is given by: VMP =Px MP, where P is the price of output, and MPL = 20 - 0.1L. The wage rate is $20. Assume that there are hiring and training costs of $40 per worker. If the firm expects the price of output to be $25, what is the optimal level of employment? Important note: Your answer needs to be rounded to 2 decimal places (e.g. 1.23). Any intermediate results should be rounded to at least 4 decimal places. Failure to do so may result in your answer not being accepted as a correct one.arrow_forwardHow do wages affect labor supply?arrow_forward
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