Suppose that low-skilled workers employed in clearing woodland can each clear one acre per month if each is equipped with a shovel, a machete, and a chainsaw. Clearing one acre brings in $1500 in revenue. Each worker’s equipment costs the worker’s employer $275 per month to rent and each worker toils 40 hours per week for 4 weeks each month.
Instructions: In part a, enter your answer as a whole number. In parts b-e, round your answers to 2 decimal places.
a. What is the marginal revenue product of hiring one low-skilled worker to clear woodland for one month? $1500
b. How much revenue per hour does each worker bring in? $ ___________
c. If the minimum wage were $9.28, would the revenue per hour in part b exceed the minimum wage? Yes
If so, by how much per hour? $________ per hour.
d. Consider the employer’s total costs. These include the equipment costs as well as a normal profit of $50 per acre. If the firm pays workers the minimum wage of $9.28 per hour, what will the firm’s economic profit or loss be per acre?
The firm’s lossprofit per acre will be $ ________
e. At what value would the minimum wage have to be set so that the firm would make zero economic profit from employing an additional low-skilled worker to clear woodland?
$__________