Question

please briefly explain any answers thanks!

Suppose that low-skilled workers employed in clearing woodland can each clear one acre per month if each is equipped with a shovel. a machete, and a chainsaw. Clearing one acre brings in $1,000 in revenue. Each worker's equipment costs the worker's employer $150 per month to rent and each worker toils 40 hours per week for four weeks each month a. What is the marginal revenue product of hiring one low-skilled worker to clear woodland for one month? Instructions: Enter your answer as a whole number b. How much revenue per hour does each worker bring in? Instructions: Round your answer to 2 decimal places. c. If the minimum wage were $6.20, would the revenue per hour in part b exceed the minimum wage? (Click to select) If so, by how much per hour?

Answer 1

(a) The marginal revenue product would be $1000.

The marginal revenue product of hiring one labor per month would be the amount of revenue increased by employing one additional labor unit.

(b) The revenue per hour would be $6.25.

The labor works 4 times 40 hours per month, ie 160 hours. Hence, revenue per hour generated by labor would be $\frac{\$1000}{160} = \$ 6.25$ .

(c) Yes, the revenue per hour exceeds the minimum wage of $6.20. The revenue per hour is $6.25, which is $0.05 per hour more than the minimum wage.

(d) For one acre, the cost is or or dollars. The revenue for one acre is $1000. The profit would be revenue less the cost, ie 1000-1192 or -192 dollars, ie a loss of $192.

Hence, the firm's loss per acre will be $192.

(e) To make zero economic profit, we must have revenue equal to cost, ie or or dollars. Hence, to satisfy the given condition, the wages should be $5.