The following represents the output per worker for kite production in two separate factories. Assume fixed plant
Question:
The following represents the output per worker for kite production in two separate factories. Assume fixed plant size (constant capital), with a fixed cost of $20. A kite sells for $10; unskilled workers earn $5/hour and skilled workers earn $15/hour. Assume for simplicity that workers work one hour.
Unskilled
| Worker | Total Product(Per hour) | Marginal Product | Value of Marginal product of Labor |
| 1 | 5 | 5 | 50 |
| 2 | 8 | 3 | 30 |
| 3 | 10 | 2 | 20 |
| 4 | 11 | 1 | 10 |
| 5 | 12 | 1 | 10 |
| 6 | 12 | 0 | 0 |
Skilled
| Worker | Total Product(Per hour) | Marginal Product | Value of Marginal product of Labor |
| 1 | 8 | 8 | 80 |
| 2 | 14 | 6 | 60 |
| 3 | 19 | 5 | 50 |
| 4 | 22 | 3 | 30 |
| 5 | 24 | 2 | 20 |
| 6 | 25 | 1 | 10 |
a) Assuming there are only unskilled workers, how many workers will the firm hire to maximize profit? Why? What are the firm's Total Cost, Total Revenue, and Profit?
b) Assume there are both unskilled and skilled workers, working in separate factories (each with the same fixed cost). How many workers of each kind will the firm hire to maximize profit? Why? What are the firm's Total Cost, Total Revenue, and Profit?
c) Assume the government imposes a minimum wage of $11/hr. How many unskilled workers and skilled workers, will the firm hire, in order to maximize profit? What are the firm's Total Cost, Total Revenue, and Profit?
Expert Answer:
a For the unskilled labor the firm will hire 5 workers Lets keep in mind that only at this level wil... View the full answer
