Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 2, Problem 2.4IP
To determine
The inefficiency created by higher-wage rate for night shift employees.
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Students have asked these similar questions
You have decided to open a coffee shop in San Bernardino. While there is a lot of
competition (i.e. it's a perfectly competitive market) for coffee in the area, you have
developed coffee making technology to sell coffees at $3 per coffee. If the minimum wage
for coffee restaurant employees is $10 per hour, and you schedule employees for 8-hour
shifts ($80 a day). How many employees should you hire?
Employee
1
2
3
4
5
1
2
3
4
Total output
(coffees per
day)
40
74
102
124
140
Marginal Product
40
34
28
22
16
Marginal Revenue
Product
$120
$102
$84
$66
$48
Marginal V
$80
$80
$80
$80
$80
Weiwei gets a part-time job in high school that pays $5 per hour with flexible hours. Shechooses to work 6 hours per week, earning $30 per week. After a while, her job reduces herpay to $4 an hour. In response, she cuts back to working 5 hours per week, earning only$20 per week. Weiwei’s parents feel bad about the pay cut, and decide to give her a weeklyallowance, in cash, to make up for it. If they want to get her back to her old utility level,how much should they give her and why?
(Select one answer from below) :
(a) $10: that is her total amount of lost earnings(b) Between $10 and $6: that is the income effect minus the substitution effect(c) Between $10 and $6: leisure is a luxury good for high school students(d) $6: that is how much she would have lost if she kept working 6 hours(e) $5: the substitution effect offsets the change in labor hours(f) Between $6 and $0: she will substitute away from labor at the old bundle(g) Between $5 and $0: a pay cut is like a negative in-kind…
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Chapter 2 Solutions
Managerial Economics: A Problem Solving Approach
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