Problem 1
Recently, some college alumni started a moving service for students living on campus. They have three employees and are debating hiring a fourth. The hourly wage for an employee is \(\$ 18\) per hour. An average moving job takes three hours. The company currently does three moving jobs per week, but with one more employee, the company could manage five jobs per week. The company charges \(\$ 80\) for a moving job. [LO 16.1, 16.2] a. What would be the new employee's marginal product of labor? b. What is the value of that marginal product? c. Should the moving service hire a fourth worker?
Problem 2
Fresh Veggie is one of many small farms in Florida operating in a perfectly competitive market. Farm labor is also perfectly competitive, and Fresh Veggie can hire as many workers as it wants for \(\$ 20\) a day. The daily productivity of a tomato picker is given in Table \(16 \mathrm{P}-1 .\) If a bushel of tomatoes sells for \(\$ 5\), how many workers will Fresh Veggie hire?
Problem 4
Sasha has 60 hours a week she can work or have leisure. Wages are \(\$ 8 /\) hour. [LO 16.3] a. Graph Sasha's budget constraint for income and leisure. b. Suppose wages increase to \(\$ 10 /\) hour. Graph Sasha's new budget constraint. c. When wages increase from \(\$ 8 /\) hour to \(\$ 10 /\) hour, Sasha's leisure time decreases from 20 hours to 15 hours. Does her labor supply curve slope upward or downward over this wage increase?
Problem 7
Identify which way the labor supply curve would shift under the following scenarios. [LO 16.5] a. A country experiences a huge influx of immigrants who are skilled in the textile industry. b. Wages increase in an industry that requires similar job skills. c. New machines require additional maintenance over time, so that the marginal productivity of labor rises.
Problem 10
Suppose a town's largest employers are its auto manufacturing plant and its airplane manufacturing plant. Airplane manufacturing jobs require familiarity with a technology that is not currently used in auto manufacturing. Assume workers are indifferent between the two types of manufacturing work. [LO 16.6] a. All else equal, which plant will pay its workers more? b. Suppose the auto industry adopts the same technology used by airplane manufacturers and trains its current workers in this technology. What will happen to the pay differential between auto manufacturing and airplane manufacturing work?
Problem 12
Match the following aspects of factor markets with the corresponding characteristics. [LO 16.7\(]\) a. analogous to producer surplus b. affected by an asset's long-run productivity c. interest paid on loans d. determined by ownership of factors of production e. determined by the value of marginal product
Problem 15
Imagine that, faced with budget shortfalls, a government changes its current policy of granting tax credits based on family size to a flat rate tax credit for a family with one or more children. [LO 16.9\(]\) a. Over time, what will happen to the average age in the population? b. Over time, what will happen to the size of the workforce?
Problem 16
In each scenario, will wages rise above the market equilibrium or fall below it? [LO 16.9] a. All but one of the factories in a town go out of business. b. All the software engineers in Silicon Valley organize into a union and go on strike. c. A major grocery store chain buys out all the other stores in the city.
