Suppose that you are starting up a lawn-raking business. All of your workers are required to supply their own rakes, so the only cost to you is hiring labor at an hourly rate. Suppose that the market price of raking someone's yard is $50 per lawn and the hourly wage is $25 per hour. The follovwing graph shows the production function (PF) for your business. On the following graph, use the green line (triangle symbol) to plot the daily isoprofit curve that indicates the profit-maximizing level of output. (Hint: Derive the slope of the isoprofit curve and then move the curve up or down until it's in the position you want; this is because you do not know the amount of profit that will yield the desired curve.) Then use the black point (plus symbol) to indicate the profit-maximizing level of labor and output per day. 100 90 Isoproft 80 70 60 Profit Max 50 40 30 20 10 PF 10 20 30 40 50 60 70 80 90 100 LABOR (Hours per day) Complete the following table with your findings regarding the profit-maximizing outcome. Economic Object Amount per Day Profit-maximizing labor hours Profit-maximizing output lawns Profit earned True or False: At the profit-maximizing level of labor, the marginal product of labor is equal to the wage rate of $25 per hour. True increase False decrease If the wage rate decreases, you will the production of raked lawns to maximize profit. LAWNS RAKED PER DAY
Suppose that you are starting up a lawn-raking business. All of your workers are required to supply their own rakes, so the only cost to you is hiring labor at an hourly rate. Suppose that the market price of raking someone's yard is $50 per lawn and the hourly wage is $25 per hour. The follovwing graph shows the production function (PF) for your business. On the following graph, use the green line (triangle symbol) to plot the daily isoprofit curve that indicates the profit-maximizing level of output. (Hint: Derive the slope of the isoprofit curve and then move the curve up or down until it's in the position you want; this is because you do not know the amount of profit that will yield the desired curve.) Then use the black point (plus symbol) to indicate the profit-maximizing level of labor and output per day. 100 90 Isoproft 80 70 60 Profit Max 50 40 30 20 10 PF 10 20 30 40 50 60 70 80 90 100 LABOR (Hours per day) Complete the following table with your findings regarding the profit-maximizing outcome. Economic Object Amount per Day Profit-maximizing labor hours Profit-maximizing output lawns Profit earned True or False: At the profit-maximizing level of labor, the marginal product of labor is equal to the wage rate of $25 per hour. True increase False decrease If the wage rate decreases, you will the production of raked lawns to maximize profit. LAWNS RAKED PER DAY
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.3P
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Question
Transcribed Image Text:Suppose that you are starting up a lawn-raking business. All of your workers are required to supply their own rakes, so the only cost to you is hiring
labor at an hourly rate. Suppose that the market price of raking someone's yard is $50 per lawn and the hourly wage is $25 per hour. The follovwing
graph shows the production function (PF) for your business.
On the following graph, use the green line (triangle symbol) to plot the daily isoprofit curve that indicates the profit-maximizing level of output. (Hint:
Derive the slope of the isoprofit curve and then move the curve up or down until it's in the position you want; this is because you do not know the
amount of profit that will yield the desired curve.) Then use the black point (plus symbol) to indicate the profit-maximizing level of labor and output
per day.
100
90
Isoproft
80
70
60
Profit Max
50
40
30
20
10
PF
10
20
30
40
50
60
70
80
90
100
LABOR (Hours per day)
Complete the following table with your findings regarding the profit-maximizing outcome.
Economic Object
Amount per Day
Profit-maximizing labor
hours
Profit-maximizing output
lawns
Profit earned
True or False: At the profit-maximizing level of labor, the marginal product of labor is equal to the wage rate of $25 per hour.
True
increase
False
decrease
If the wage rate decreases, you will
the production of raked lawns to maximize profit.
LAWNS RAKED PER DAY
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