Suppose vacation time comes in 1- week intervals, and that the total willingness to pay for total vacation time by younger and older workers in a competitive industry is as given in the following table: Suppose VMP = 150/ wk
Suppose VMP = 150/ wk for younger workers, 175/wk for older workers, and that existing firms give all their workers, young and old, 5 weeks per year of vacation time. Can these firms be maximizing their profits? If so, explain why. If not, say what changes they should make, and how much extra profit willresult.
Total Willingness to Pay Total vacation time, weeks Younger workers 300 475 600 700 750 Older workers 500 800 1050 1250 1400 4
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Comparing VMP with marginal willingness to pay for additional vacation time we see …View the full answer
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