Consider the market for sleigh rides, which you can assume is a price-taker mark
ID: 1210498 • Letter: C
Question
Consider the market for sleigh rides, which you can assume is a price-taker market. Suppose some sleigh companies are discriminatory and hire only American citizens to drive their sleighs, while other firms are nondiscriminatory-they don't care about the citizenship of the drivers they hire as long as they have a legal right to work in the United States. Assume for now that customers are nondiscriminatory-when they decide to take a sleigh, they don't care about the citizenship status of the driver The marginal cost (MC), average variable cost (AVC), and average total cost (ATC) curves of the two types of firms are shown on the following graphs Figure A shows the cost structure of a discriminatory firm; Figure B shows the cost structure of a nondiscriminatory firm. Because nondiscriminatory firms are able to hire from a larger pool of potential workers, they are able to provide the same services at a lower cost Figure A: Discriminatory Firm Figure B: Nondiscriminatory Firm 100 90 80 70 a 60 100 90 80 70 a 60 ATC 40 40 TC AVC AVC 10 10 0 6 12 18 24 30 36 42 48 54 60 DISTANCE (Hundreds of miles per day) 0 6 12 18 24 30 36 42 48 54 60 DISTANCE (Hundreds of miles per day) Suppose the price of a sleigh ride is currently $0.40 per mileExplanation / Answer
Q2. When an employee offers employee perks such as life insurance, health insurance etc apart from cash wages then such perks are called fringe benefits.
Hence, the correct answer is option (1).
Q3. The lowest wage that the fitness club can pay to hire five swimming instructors is $388 per week.
This is because this wage rate is either greater than or equal to the reservation wage of 5 swimming instructors (Andrew, Eileen, Kate, Clancy, and Hubert) and thus would enable the club to hire five swimming instructors.
There are six instructors that have height greater than 68 inches.
If fitness club made a regulation that only instructor above the height of 68 inches be hired then lowest wage that can enable the club to hire such tall instructors is $444 per week because this wage rate is either equal to or greater than the reservation wage of 5 instructors having height more than 68 inches (Andrew, Clancy, Hubert, Manuel, and Antonio).
Thus, under this new regulation, the wage rate the fitness club must pay to attract 5 swimming instructors rises by ($444 - $388) $56 per week.