ch13 - Chapter 13 Labor Markets Poverty and Income...

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Chapter 13: Labor Markets, Poverty, and Income Distribution Wednesday, July 21
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ANOTHER PIZZA RESTAURANT Again, I own a pizza restaurant. Each slice sells for $2. .. N: The number of workers I hire Q: The number of pizza slices that I sell N Q 1 21 2 38 3 51 4 60 5 65 6 67 7 67
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MP AND VMP OF LABOR Again, I own a pizza restaurant. Each slice sells for $2. .. N: The number of workers I hire Q: The number of pizza slices that I sell R: My revenue N Q MP R VMP 1 21 21 42 42 2 38 17 76 34 3 51 13 102 26 4 60 9 120 18 5 65 5 130 10 6 67 2 134 4 7 67 0 134 0 MP: The marginal product of labor, ΔQ/ΔN VMP: The value of the marginal product of labor, P × (ΔQ/ΔN) or ΔR/ΔN
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QUESTION 1 (my demand for labor) Again, I own a pizza restaurant. Each slice sells for $2. .. N: number of workers Q: quantity R: revenue MP: marginal product of labor, ΔQ/ΔN VMP: value of MP, P × (ΔQ/ΔN) or ΔR/ΔN N Q MP R VMP 1 21 21 42 42 2 38 17 76 34 3 51 13 102 26 4 60 9 120 18 5 65 5 130 10 6 67 2 134 4 7 67 0 134 0 If the wage is $30 (so I must pay $30 to hire each worker), how many workers should I employ, to maximize my profit? A) 1 B) 2 C) 3 D) 4 E) 5
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answer to question 1 Again, I own a pizza restaurant. Each slice sells for $2. .. N: number of workers Q: quantity R: revenue MP: marginal product of labor, ΔQ/ΔN VMP: value of MP, P × (ΔQ/ΔN) or ΔR/ΔN N Q MP R VMP 1 21 21 42 42 2 38 17 76 34 3 51 13 102 26 4 60 9 120 18 5 65 5 130 10 6 67 2 134 4 7 67 0 134 0 If the wage is $30 (so I must pay $30 to hire each worker), how many workers should I employ, to maximize my profit? A) 1 B) 2 C) 3 D) 4 E) 5
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QUESTION 2 (my demand for labor) Again, I own a pizza restaurant. Each slice sells for $2. .. N: number of workers Q: quantity R: revenue MP: marginal product of labor, ΔQ/ΔN VMP: value of MP, P × (ΔQ/ΔN) or ΔR/ΔN N Q MP R VMP 1 21 21 42 42 2 38 17 76 34 3 51 13 102 26 4 60 9 120 18 5 65 5 130 10 6 67 2 134 4 7 67 0 134 0 If the wage is $5 (so I must pay $5 to hire each worker), how many workers should I employ, to maximize my profit? A) 1 B) 2 C) 3 D) 4 E) 5
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answer to question 2 Again, I own a pizza restaurant. Each slice sells for $2. .. N: number of workers Q: quantity R: revenue MP: marginal product of labor, ΔQ/ΔN VMP: value of MP, P × (ΔQ/ΔN) or ΔR/ΔN N Q MP R VMP 1 21 21 42 42 2 38 17 76 34 3 51 13 102 26 4 60 9 120 18 5 65 5 130 10 6 67 2 134 4 7 67 0 134 0 If the wage is $5 (so I must pay $5 to hire each worker), how many workers should I employ, to maximize my profit? A) 1 B) 2 C) 3 D) 4 E) 5
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DEMAND FOR LABOR SCHEDULE Suppose that there are 20 pizza restaurants in town just like mine. Let DL i be the quantity that each restaurant would choose given each wage, and let DL be the total demand for labor in the pizza worker market. N VMP 1 $42 2 $34 3 $26 4 $18 5 $10 6 $4 7 $0 W DL i DL >$42 0 0 $34 $42 1 20 $26 $34 2 40 $18 $26 3 60 $10 $18 4 80 $4 $10 5 100 $0 $4 6 120
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If workers‟ value of marginal product decreases as more are hired, then at higher wages, firms will choose to hire fewer workers.
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ch13 - Chapter 13 Labor Markets Poverty and Income...

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