1. Brenda owns a construction company that employs bricklayers and other skilled tradesmen. Her firm’s MRP...

1. Brenda owns a construction company that employs bricklayers and other skilled tradesmen. Her firm’s MRP for bricklayers is $16.50 per hour for each of the first five bricklayers, $15.50 for an sixth brick layer, and $14.75 for a seventh bricklayer. Given that she is a price taker when hiring bricklayers, how many bricklayers will she hire if the market equilibrium wage for bricklayers is $15.00 per hour?

2. The market equilibrium wage is currently $15 per hour among pet groomers. At that wage, 148 pet groomers are currently employed in the Ft. Myers. The state legislature then sets a minimum wage of $13.50 per hour for pet groomers. If there are no changes to either the demand or supply for pet groomers when that minimum wage is imposed, the number of pet groomers employed in the state will be:

a. Fewer than 148

b. Still 148.

c. More than 148.

d. This is a bilateral monopsony so you can’t tell.

Expert Solution

1) MRP is the marginal revenue product of a labour, which represents the revenue earned from the last employed worker. So, Brenda shoud only hire workers upto a point where the MRP from the last worker is higher than the cost of employing the worker. The MRP from the 6th labour is $15.50 and the MRP from the 7th labour is $14.75. The equilibrium wage rate is $15. So, Brenda should only 6 workers because the MRP from 6th worker is higher than the equilibrium wage. Brenda should not hire the 7th worker because the MRP from 7th worker is less than the equilibrium wage and hence, she will suffer a loss if she employes the 7th worker.

2) As the minimum wage of $13.5 is less than the equilibrium wage of $15, this minimum wage will not effect the equilibrium wage and the number of pet groomers employed. So, the number of pet groomers employed in the state will be still 148. So option b is the correct answer.

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Rahul Sunny answered 6 months ago

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