Chapter_17_-_Answer_to_Textbook_Problems

Chapter_17_-_Answer_to_Textbook_Problems - 17 Answers to...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
17 MARKETS FOR FACTORS OF PRODUCTION Answers to the Problems 1. a. The wage rate is $6 an hour. The wage rate adjusts to make the quantity of labor demanded equal to the quantity supplied. b. The number of pickers hired is 400 a day. At a wage rate of $6 an hour, 400 pickers a day are hired. c. The income received by blueberry pickers is $2,400 an hour. Income equals the wage rate ($6 an hour) multiplied by the number of pickers (400). d. The wage rate is $5 an hour. The demand curve shifts leftward by 100 pickers at each wage rate. The wage rate adjusts to make the quantity of labor demanded equal to the quantity supplied. e. The number of pickers hired is 350 a day. At a wage rate of $5 an hour, 50 pickers are laid off. f. The income received is $1,750 an hour. Income equals the wage rate ($5 an hour) multiplied by the number of pickers (350). 2. a. The marginal product of labor is the increase in total product that results from hiring one additional student. For example, if Wanda increases the number of students hired from 4 to 5, total product (the quantity of fish packed) increases from 120 to 145 pounds. The marginal product of increasing the number of students from 4 to 5 is 25 pounds of fish. To plot the marginal product curve, the marginal product is plotted at the mid-point. For example, when the number of students increases from 4 to 5 a day, marginal product is 25 pounds of fish. The 25 pounds of fish is plotted at 4.5 students a day. b. The marginal revenue product of labor is the increase in total revenue that results from hiring one additional student. For example, if Wanda hires 4 students, they produce 120 pounds of fish. Wanda sells the fish for 50 cents a pound, so total revenue is $60. If Wanda increases the number of students hired from 4 to 5, total product increases to 145 pounds. Total revenue from the sale of this fish is $72.50. Marginal revenue product resulting from hiring the fifth student is $12.50 ($72.50 minus $60). Alternatively, marginal revenue product equals marginal product multiplied by marginal revenue (price). Marginal revenue product of hiring the fifth student is $12.50, which is 25 pounds of fish she sells at 50 cents a pound. c. One point on Wanda’s demand for labor curve: At a wage rate of $12.50 an hour, Wanda will hire 4.5 students. The demand for labor curve is the same as the marginal revenue product curve. d. Wanda hires 6.5 students a day. Wanda hires the number of students that makes the marginal revenue product equals to the wage rate of $7.50 an hour. When Wanda increases the number of students from 6 to 7, marginal product is 15 pounds of fish an hour, which Wanda sells for 50 cents a pound.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Marginal revenue product is $7.50—the same as the wage rate. Remember the marginal revenue product is plotted at the mid-point between 6 and 7 students a day—6.5 students a day. 3.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/09/2009 for the course ECON 2 taught by Professor Kim during the Spring '08 term at UCSD.

Page1 / 4

Chapter_17_-_Answer_to_Textbook_Problems - 17 Answers to...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online