Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
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?
Chapter 20 Solutions
Foundations of Economics (8th Edition)
Ch. 20 - Prob. 1SPPACh. 20 - Prob. 2SPPACh. 20 - Prob. 3SPPACh. 20 - Prob. 4SPPACh. 20 - Prob. 5SPPACh. 20 - Prob. 6SPPACh. 20 - Prob. 7SPPACh. 20 - Prob. 8SPPACh. 20 - Prob. 9SPPACh. 20 - Prob. 1IAPA
Ch. 20 - Prob. 2IAPACh. 20 - Prob. 3IAPACh. 20 - Prob. 4IAPACh. 20 - Prob. 5IAPACh. 20 - Prob. 6IAPACh. 20 - Prob. 7IAPACh. 20 - Prob. 8IAPACh. 20 - Prob. 9IAPACh. 20 - Prob. 10IAPACh. 20 - Prob. 11IAPACh. 20 - Prob. 1MCQCh. 20 - Prob. 2MCQCh. 20 - Prob. 3MCQCh. 20 - Prob. 4MCQCh. 20 - Prob. 5MCQCh. 20 - Prob. 6MCQCh. 20 - Prob. 7MCQ
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Similar questions
- If immigration is reduced, what is the impact on the wage for low-skilled labor? Explain.arrow_forwardBelow are three examples of an individual experiencing a wage change at various points in their career: i) After five years of working with their current employer, the individual received a scheduled increase in their hourly wage. ii) In celebration of the firm's 50th anniversary, the individual's employer increased the hourly wage of all employees for the month of February. iii) After a particularly profitable year, the individual's employer increased the hourly wage of all employees. Assume that each wage change generated the same sized substitution effect. Which of the three wage changes do we expect will least motivate the individual to increase their hours worked? Explain.arrow_forwardIn Okennewick, 180 people are willing to spend an hour working as pizza makers for an hourly wage of $20. For each additional $5 that the wage increases above $20, an additional 45 people are willing to spend an hour working. For hourly wages of $20, $25, $30, $35, and $40, plot the daily labor supply curve for pizza makers on the following graph. WAGE (Dollars per hour) 50 45 40 35 25 20 15 10 5 0 0 45 + 90 135 180 225 270 315 LABOR (Number of workers) 360 405 450 Supply What is one explanation for why this labor supply curve is upward sloping? The opportunity cost of leisure increases as wages increase. Labor production functions exhibit diminishing marginal returns. Wages have to increase to accommodate union pressure. O Firms are willing to hire more pizza makers at a lower wage.arrow_forward
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