Consider the workers at Live Happley Orchards whose production schedule for boxe
ID: 2496428 • Letter: C
Question
Consider the workers at Live Happley Orchards whose production schedule for boxes of apples is given by the following table: Live Happley is a small player in the apple business and has no individual effect on wages and prices. Suppose that the market wage for apple pickers is $200 per day. If the price of apples is $13 per box, Live Happley should hire Suppose that the price of apples rises to $15 per box, but the wage rate remains at $200 per day. Now Live Happley should hire Assuming that all apple-producing firms have a similar production schedule, an increase in the price of apples will cause the apple pickers to. Suppose that wages rise to $250 per day due to an increased demand for workers. Assuming that the price of apples remains at $15 per box, Live Happley will now hire.Explanation / Answer
Wage rate of apple pickers = $200 per day
Price of apples = $13 per box
Following is the required table –
Labor
(Number of workers)
Output (TP)
(Boxes per day)
MP
(TPn-TPn-1)
MRP
(MP * Price)
0
0
-
-
1
20
20
260
2
38
18
234
3
54
16
208
4
68
14
182
5
80
12
156
A firm hires that amount of labor up to which MRP is either greater than or equal to wage rate. As above table shows that up to hiring of 3 workers, MRP is greater than wage rate.
So, if market wage rate for apple pickers is $200 per day and price of apples is $13 per box, Live Happely should hire 3 workers.
Now,
Price per box of apples increases to $15 per box from $13 per box.
Wage rate of apple pickers = $200 per day
Price of apples = $15 per box
Following is the required table –
Labor
(Number of workers)
Output (TP)
(Boxes per day)
MP
(TPn-TPn-1)
MRP
(MP * Price)
0
0
-
-
1
20
20
300
2
38
18
270
3
54
16
240
4
68
14
210
5
80
12
180
A firm hires that amount of labor up to which MRP is either greater than or equal to wage rate. As above table shows that up to hiring of 4 workers, MRP is greater than wage rate.
So, if market wage rate for apple pickers is $200 per day and price of apples is $15 per box, Live Happely should hire 4 workers.
Assuming that all apple-producing firms have similar production schedule, an increase in the price of apples will cause the number of apple pickers to increase.
Now,
Wage rate of apple pickers rises from $200 per day to $250 per day.
Wage rate of apple pickers = $250 per day
Price of apples = $15 per box
Following is the required table –
Labor
(Number of workers)
Output (TP)
(Boxes per day)
MP
(TPn-TPn-1)
MRP
(MP * Price)
0
0
-
-
1
20
20
300
2
38
18
270
3
54
16
240
4
68
14
210
5
80
12
180
A firm hires that amount of labor up to which MRP is either greater than or equal to wage rate. As above table shows that up to hiring of 2 workers, MRP is greater than wage rate.
So, if market wage rate for apple pickers is $250 per day and price of apples is $15 per box, Live Happely should hire 2 workers.
Labor
(Number of workers)
Output (TP)
(Boxes per day)
MP
(TPn-TPn-1)
MRP
(MP * Price)
0
0
-
-
1
20
20
260
2
38
18
234
3
54
16
208
4
68
14
182
5
80
12
156