Stone, Inc., owns a clothing factory and hires workers in a competitive labor market to stitch cut denim fabric into jeans. The fabric required to make each pair of jeans costs $5. The company's weekly output of finished jeans varies with the number of workers hired, as shown in the following table:
Number of workersJeans (pairs/week)
0……………………………………….0
1……………………………………….25
2……………………………………….45
3……………………………………….60
4……………………………………….72
5……………………………………….80
6……………………………………….85
a. If the jeans sell for $35 a pair and the competitive market wage is $250 per week, how many workers should Stone hire? How many pairs of jeans will the company produce each week?
b. Suppose the Clothing Workers Union now sets a weekly minimum acceptable wage of $230 per week. All the workers Stone hires belong to the union. How does the minimum wage affect Stone's decision about how many workers to hire?
c. If the minimum wage set by the union had been $400 per week, how would the minimum wage affect Stone's decision about how many workers to hire?
d. If Stone again faces a market wage of $250 per week but the price of jeans rises to $45, how many workers will the company now hire?