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1.) Gordon's Pizzeria, a firm that is small relative to both the labor market and the pizza market, can hire workers at an hourly wage of $12. The 50th hour of labor added 4 pizzas to the firm's output, and each pizza can be sold for $10.

a) How much does the 50th labor-hour add to the firm's profit? ________________________________

b) Should the firm have hired this 50th unit of labor? Explain why or why not.____________________

___________________________________________________________________________________

3.) Refer to the figure below.

(a) If there is only one employer in this labor market, then how much labor will be hired? ____________

(b) What is the wage this employer will pay? ________________

5.) Pam is thinking of buying a new printer. If she does, the printer will add $300 to her office's revenue right away as well as one, two, and three years from now.
(a) Assuming an annual interest rate of 6%, what is the present value of this printer?

(b) The printer costs $1,150. Would Pam buy this printer?

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Solution Summary

The solution examines the economics, marginal, labor and profits to determine if Pam should buy a printer.

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1.) Gordon's Pizzeria, a firm that is small relative to both the labor market and the pizza market, can hire workers at an hourly wage of $12. The 50th hour of labor added 4 pizzas to the firm's output, and each pizza can be sold for $10.

a) How much does the 50th labor-hour add to the firm's profit?
The 50th worker ...

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