Apple Mountain Pie Company makes apple pie filling for the consumer market. They are the only...

Apple Mountain Pie Company makes apple pie filling for the consumer market. They are the only firm in the town of Walnut Hills and they, therefore, face an upward sloping labor supply curve: Es = 20w − 120, where E is the number of workers hired each hour and w is the hourly wage rate. Thus, Apple Mountain faces an upward sloped marginal cost of labor curve of MCe = 6 + 0.1E. For simplicity, assume a perfectly elastic labor demand curve. Each hour of labor produces 10 cans of pie filling that can be sold at $5 per can. There are no other costs of production for Apple Mountain.

a. How many workers should Apple Mountain hire each hour to maximize profits and at what wage?

b. Now assume that a wizard moves to Walnut Hills who can determine, just by looking at \them, what each person’s reservation wage is in the town. If he decides to help out the Apple Mountain Pie Company so that they can perfectly discriminate, what would be the number of workers and the wage offered by the pie company now?

c. Compare the wages and levels of employment. Is this what we would expect from a non-discriminating monopsonist vs. a perfectly discriminating monopsonist?

Expert Solution

a) A monoponist will hire labor upto the point where marginal resource cost equals the labor demand. Labor demand here is MRP curve which is flat at a wage rate of 10*5 = $50. At this wage rate, it will hire

50 = 6 + 0.1E

E = 440.

The wage rate is determined by supply function.

440 = 20w - 120

w = 28.

A total of 440 workers Apple Mountain is hiring each hour to maximize profits and at a wage rate of $28

b) Company will now hire a number of workers at which labor demand equals labor supply and will pay each worker his resevation. The number of workers will be E = 20*50 - 120 = 880 and wage rate is fixed at $50.

c) When we compare the two results we see that the labor demand is perfectly elastic. For a non discriminatory monopsonist, the wage rate and the employment both are lower. Ideally wage should be lower for a non-discriminating monopsonist and labor units should be more.

Rahul Sunny answered 2 years ago

Assume a consumer consumes only pumpkin pie and apple cider. Price of pie, Pp is $8...

Assume a consumer consumes only pumpkin pie and apple cider. Price of pie, Pp is $8 and price of cider, Pc is $5, and income of the consumer is $160. Write down this consumers Budget constraint. Draw the BC and mark the x and y coordinates. What is the slope of this BC? If the income increases to $240, show graphically how the BC changes. Mark the x and y coordinates. Write down the new BC. What is the slope...

A) Mountain Dental Services is a specialized dental practice whose only service is filling cavities. Mountain...

A) Mountain Dental Services is a specialized dental practice whose only service is filling cavities. Mountain has recorded the following for the past nine months: ( answered in2 decimal) Month Number of Cavities Filled Total Cost January 450 $5,250 February 575 6,250 March 700 6,500 April 300 5,300 May 500 5,950 June 350 5,300 July 600 5,600 August 675 6,500 September 425 5,200 Required: 1. Use the high-low method to estimate total fixed cost and variable cost per cavity filled....

Mountain Dental Services is a specialized dental practice whose only service is filling cavities. Mountain has...

Mountain Dental Services is a specialized dental practice whose only service is filling cavities. Mountain has recorded the following for the past nine months: Month Number of Cavities Filled Total Cost January 525 $6,100 February 650 6,000 March 550 6,100 April 475 5,850 May 400 5,250 June 625 6,400 July 600 6,350 August 300 5,000 September 700 6,600 Required: 1. Use the high-low method to estimate total fixed cost and variable cost per cavity filled. (Round your answers to 2...

Bart's Bakery makes two kinds of pies: apple and blueberry. If you select a pie at...

Bart's Bakery makes two kinds of pies: apple and blueberry. If you select a pie at random, the probability it is apple is 0.88. Bart's Bakery also makes two sizes of pies: large and small. The probability a randomly selected apple pie is large is 0.60. The probability a randomly selected blueberry pie is large is 0.75. Given that a randomly selected pie is small, what is the probability it is an apple pie? Group of answer choices 0.9215 0.0785...

Buck and Sally Starnes formed the Starnes Pie Cooperative. The company makes pies, all kinds of pie,...

Buck and Sally Starnes formed the Starnes Pie Cooperative. The company makes pies, all kinds of pie, with a specialty in Derby Pie, but has an assorted collection of fruit pies, meringues, and even a Boston Cream Pie that is to die for. At first, the couple operated the company out of their own kitchen and garage. With some success, Buck and Sally eventually quit their “real” jobs to work on pies full time. They hired several workers to help them process orders too. They...

Apple Valley Orchards, Inc. (AVO) make apple products. A certain apple pie requires the following: ...

Apple Valley Orchards, Inc. (AVO) make apple products. A certain apple pie requires the following: Direct materials standard 1.5 pounds at $7.25 per pound Direct labor standard 0.25 hours at $14.00 per hour During September, AVO purchased 1,875 pounds of direct materials costing $13,125 and used 1,825 pounds of direct materials to produce and sell 1,200 pies. Direct labor totaled 280 direct labor hours for $3,990. Required: a. Compute the direct materials variances for September. b. ...

The Hershey Company makes candy for the retail consumer market. One product is the well-known, Chocolate...

The Hershey Company makes candy for the retail consumer market. One product is the well-known, Chocolate Kiss. It manufactures this product in the following departments: Melting, Molding, and Wrapping. In the Melting Department, the food ingredients including unsweetened chocolate are placed in large melting vats along with sugar in specific proportions. They are melted together in order to perfect this well-known candy. The result is a gooey-blend of melted chocolate. This mixture is transferred from the Melting Department to the...

An apple pie is removed from the oven and placed on a rack to cool. Discuss...

An apple pie is removed from the oven and placed on a rack to cool. Discuss three types of heat transfer that take place as the pie cools.

You are the Controller for ABC Company, which makes and sells products. You are filling in...

You are the Controller for ABC Company, which makes and sells products. You are filling in for the CFO of your company by making a presentation at a pre-planning meeting held at your company. Your topic is decentralization.

Apple and Samsung compete in the market for phones. Apple is the market leader and so...

Apple and Samsung compete in the market for phones. Apple is the market leader and so they choose how many households to service, and then Samsung responds with their quantity choice. The marginal cost of providing a quality phone to a is $40 for each user. The total market demand for phones is 200 – 0.4Q. According to the Stackelberg model, what is Samsung reaction function to Apple?

Question