Question

Refer back to your answers to Problem 28-1 in answering the following questions.

a. What is the maximum wage the firm will be willing to pay if it hires 15 workers?

b. The weekly wage paid by computer printer manufacturers in a perfectly competitive market is $\$1200$. How many workers will the profit-maximizing employer hire?

c. Suppose that there is an increase in the demand for printed digital photos. Explain the likely effects on marginal revenue product, marginal factor cost, and the number of workers hired by the firm?

Short answer

a. The max wage is$\$1000$.

b. $14$workers.

c. The number of workers hired by the firm will increase.

Step-by-step solution

Introduction

The elasticity of demand, or demand elasticity, alludes to how delicate demand for a decent is contrasted with changes in other financial variables, like price or pay. It is regularly alluded to as price elasticity of demand on the grounds that the price of a decent or administration is the most well-known monetary element used to quantify it

Explanation Part (a)

The firm will hire workers until,

Marginal revenue product = Marginal cost

hence, the max wage is$\$1000$

Explanation Part (b)

At the$14th$worker the marginal revenue product = $\$1200$

Hence, The profit-maximizing individuals will also be acquired more by$14$ enterprise..

Explanation Part (c)

If there is an increase in the demand for printed digital photos then the number of workers hired by the firm will increase as there will be an increase in the price of printers due to the increase in desire.