Suppose that a car dealership wishes to see if efficiency wages will help improve its salespeople's productivity. Currently, each salesperson sells an average of one car per day while being paid $20 per hour for an eight-hour day.
a. What is the current labor cost per car sold?
b. Suppose that when the dealer raises the price of labor to $30 per hour, the average number of cars sold by a salesperson increases to two per day.
What is now the labor cost per car sold?
By how much is it higher or lower than it was before?