Foundations of Economics (8th Edition)
Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 20, Problem 3SPPA
To determine

Equilibrium wage rate of high-skilled labor and the number of high-skilled workers employed.

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1. Computing labor productivity and its relationship to the demandfor labor Sizzler's produces charcoal grills in a small manufacturing facility and sells the grills in a competitive market. The following table presents the company's production function: Labor (Number of workers) 0 OUTPUT (Grills) 400 360 320 280 Use the blue points (circle symbol) to plot the production function for Sizzler's on the following graph. 240 200 160 120 80 40 0 1 0 2 3 4 5 1 Output (Grills) 0 95 185 260 320 355 2 3 LABOR (Number of workers) 4 5 Production Function (?) Calculate the marginal product of labor (MPL) of each worker, and then plot the MPL curve on the following graph using the blue points (circle symbol).
Let us consider Amanda can work a maximum of 60 hours per week, at a wage rate of $5 per hour. Welfare benefits are fixed at $200 per week, with a 100 percent tax back on labour earnings. Finally, the earnings supplement equals half the difference between an individual’s labour earnings and the benchmark earnings of $450 per week. This supplement can be collected only if the individual forgoes welfare benefits and works a minimum of 30 hours per week. Draw Amanda's budget constraint, and analyze the work decision. (Make sure to graph)
Part a. What is the marginal physical product(MPP) of the third unit of labor hired? Part b. What is the marginal revenue product(MRP) of the fourth unit of labor hired? Part c. If the labor market equilibrium wage(W*) were $9 per hour, how many workers would a firm wish to hire? Why?
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