Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 5, Problem 23PAA
To determine
To find: The optimal mix inputs and long-run investment decisions.
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A company has 700 employees who work 140 hours a month each. Each worker earns $37 per hour. There is a profitable project the company would like to start, but it would require an additional 42,000 working hours within three months to be completed, and all the employees are fully loaded with other projects. The company does not want to hire new staff; they would like the project to be completed by the current workforce instead.
Given that the wage elasticity of labor supply is 0.65, calculate the hourly wage the company should offer its employees to encourage them to work on the new project.
A company has 350 employees who work 120 hours a month each. Each worker earns $21 per hour. There is a profitable project the company would like to start, but it would require an additional 21,000 working hours within three months to be completed, and all the employees are fully loaded with other projects. The company does not want to hire new staff; they would like the project to be completed by the current workforce instead.Given that the wage elasticity of labor supply is 0.8, calculate the hourly wage the company should offer its employees to encourage them to work on the new project. Use the midpoint method and round to two decimal places throughout your calculations.
You have decided to open a coffee shop in San Bernardino. While there is a lot of
competition (i.e. it's a perfectly competitive market) for coffee in the area, you have
developed coffee making technology to sell coffees at $3 per coffee. If the minimum wage
for coffee restaurant employees is $10 per hour, and you schedule employees for 8-hour
shifts ($80 a day). How many employees should you hire?
Employee
1
2
3
4
5
1
2
3
4
Total output
(coffees per
day)
40
74
102
124
140
Marginal Product
40
34
28
22
16
Marginal Revenue
Product
$120
$102
$84
$66
$48
Marginal V
$80
$80
$80
$80
$80
Chapter 5 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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- A firm produces output via the function: Q = L - (L²/800), where Q is the output per week and L is the number of labor hours per week. The firm's additional cost of hiring an extra hour of labor is about $25 per hour (wage plus fringe benefits). The firm faces the fixed selling price, P = $40. How much labor should the firm employ?arrow_forwardQuestion Two A coal-mining company is the only employer in town, and faces this supply curve for labor: W = 48 + ( 72/2000 )L where w is the daily wage, in dollars, and L is the number of workers employed. The company faces this demand curve for coal: P = 60 − ( 9/ 4000 )Q where p is the price of coal, per ton, and Q is the number of tons sold per day. Coalminers produce 8 tons of coal each, per day, regardless of the number hired. The mining company maximizes profit. a) How many workers will be hired, and how much profit will be made? b) Suppose a union is formed, which sets a wage of $120 per day. At this wage, according to the supply curve given above, 2000 miners are willing to work, and the company is free to hire as many of these as it wants. How many will be hired, and how much profit will be made?arrow_forwardCentral Manufacturing Company is the only manufacturing facility in a small remote town, and Central Manufacturing Company is the only employer of machinists in the area. The graph below shows the market for machinists with the marginal factor (resource) cost curve, the labor supply curve, and the marginal revenue product curve. A) Identify the profit-maximizing number of machinists. Explain using the labeling on the graph. (B) Identify the profit-maximizing wage rate that Central Manufacturing Company will pay its machinists. Explain using the labeling on the graph. (C) If the marginal product of machinists increases, what will happen to the quantity of output produced by Central Manufacturing Company? Explain. use the following grapharrow_forward
- Planes frequently push back from the gate on time, but then wait 2 feet away from the gate until it is time to queue up for takeoff. This increases fuel consumption and increases the time that passengers must sit in a cramped plane awaiting takeoff. The following table shows the pay schedule for the flight crew. Pay Flight Attendant Captain First Officer Per diem $3 $3 $3 Holding pay per hour $20 $20 $20 Hourly wage (after push back) $38 $184 $50 Per diem pay indicates how much the flight crew earns once it checks into the airport. Holding pay indicates how much the flight crew earns after it loads the plane. Hourly wage indicates how much the flight crew earns after it pushes back from the gate and turns on the beacon. In this scenario, who does not have an incentive to push back from the gate as early as possible? Check all that apply. Captain First officer Flight attendants Passengers True or False: Allowing the airline…arrow_forwardPlanes frequently push back from the gate on time, but then wait 2 feet away from the gate until it is time to queue up for takeoff. This increases fuel consumption and increases the time that passengers must sit in a cramped plane awaiting takeoff. The following table shows the pay schedule for the flight crew. Pay Flight Attendant Captain First Officer Per diem $3 $3 $3 Holding pay per hour $20 $20 $20 Hourly wage (after push back) $38 $184 $50 Per diem pay indicates how much the flight crew earns once it checks into the airport. Holding pay indicates how much the flight crew earns after it loads the plane. Hourly wage indicates how much the flight crew earns after it pushes back from the gate and turns on the beacon. In this scenario, who has an incentive to push back from the gate as early as possible? Check all that apply. First officer Passengers Captain Flight attendants True or False: Reducing crew members' hourly…arrow_forwardAnne would produce 10 robots a week working for an employer that recently offered her a position. Each robot requires $50 in material inputs and sells for $100. For Anne, this would mean no longer day trading, from which she makes $450 per week. Which of the following wage rates might Anne and the robot factory agree to? $400/week $460/week $510/week $550/day None of the abovearrow_forward
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