Principles of Economics (MindTap Course List)
8th Edition
ISBN: 9781305585126
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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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
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Your enterprising uncle opens a sandwich shop that employs 11 people. The employees are paid $15 per hour, and a sandwich sells for $3.
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What factor limits the amount a firm can pay a worker to produce a product?
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Principles of Economics (MindTap Course List)
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- Your enterprising uncle opens a sandwich shopthat employs 7 people. The employees are paid$12 per hour, and a sandwich sells for $6. If youruncle is maximizing his profit, what is the value ofthe marginal product of the last worker he hired?What is that worker’s marginal product?arrow_forwardThe maximum number of workers that a firm would hire isarrow_forwardSuppose 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 zeroarrow_forward
- What is the difference between and Accounting Profit and an Economic Profit? How does Technology affect the Demand for Labor?arrow_forwardIn a sandwich shop. Employees are paid €3 per hour, and a sandwich sells for €1. If the sandwich shop owner is maximizing profits, what is the value of the marginal product for the last sandwich sold? What is the marginal product?arrow_forwardWhich of the following events may increase the marginal product of labor? Check all that apply. An increase in the wage rate A technological improvement that is complementary for this type of labor A technological improvement that is substitutable for the labor in this market Good weather causes an increase in supply and a fall in price for one of the inputs used to make the goodarrow_forward
- Kaiser's Ice Cream Parlor produces smoothies. The market for smoothies is perfectly competitive, and the price is $4.00 a smoothie. The labor market is competitive, and the wage rate is $48.00 a day. The table shows part of the workers' total product schedule. Calculate the marginal product of hiring the fourth worker and the value of the marginal product of the fourth worker. The marginal product of hiring the fourth worker is smoothies a day. The value of the marginal product of the fourth worker is $a day. de in % 5 DOD t 6 M ||₁ & 7 u * 8 9 Workers 2 3 4 6 O 0 Smoothies per day 28 40 50 58 62 Next mpts tact Us | ✪arrow_forwardA 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_forward
- How do wages affect labor supply?arrow_forwardSuppose a firm finds itself in a situation where the marginal product of the last employee hired is 4 units per hour, and the marginal product of the last machinepurchased is 10 units per hour. If the wage is $20/hour and the hourly rental rate of a machine is $50, what should this firm do if it wants to be as productive aspossible?a. Lay off workers and use more machines.b. Hire workers and use less machines.c. Lay off workers and use less machines,d. Hire workers and use more machines.e. Nothing. This firm is already operating efficiently.arrow_forwardRobert can make 10 pizzas each hour. He works 8 hours each day. He is paid $100 a day. The shop can sell the pizzas for $15 each. What is Robert's value of marginal product of labor?arrow_forward
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