Asked by Holly Bienias on Jul 04, 2024
Verified
The marginal product of labor at One Guy's Pizza is One Guy's pays each unit of labor the minimum wage of $6.00. Also, One Guy's can sell all the pizza it produces for $12. What is the optimal level of labor employment for One Guy's pizza? If the minimum wage is raised to $8, what impact will this have on One Guy's optimal labor employment level?
Marginal Product
The additional output that is produced by using one more unit of a particular input, holding other inputs constant.
Optimal Labor Employment
The most efficient and effective level of staffing for a business or organization to maximize productivity and minimize costs.
Minimum Wage
The lowest legal salary that employers can pay their employees, often set by government laws.
- Elaborate the optimal scale of labor employment with reference to the marginal product of labor, wage rates, and marginal revenue.
- Analyze the impact of wage rate changes on the employment of labor.
- Explore the effects of regulatory changes, such as minimum wage increases, on employment levels.
Verified Answer
ZK
Zybrea KnightJul 07, 2024
Final Answer :
One Guy's marginal revenue of the product of labor is: To maximize profits, One Guy's must equate the marginal revenue of the product of labor to the wage rate. This is: Thus, One Guy's optimal employment of labor is 64 units. If the minimum wage is raised to $8, the optimal level of employment becomes That is, One Guy's optimal employment of labor falls to 36 units if the minimum wage rises by one third.
Learning Objectives
- Elaborate the optimal scale of labor employment with reference to the marginal product of labor, wage rates, and marginal revenue.
- Analyze the impact of wage rate changes on the employment of labor.
- Explore the effects of regulatory changes, such as minimum wage increases, on employment levels.