Question

Suppose that low-skilled workers employed in clearing woodland can each clear one acre per month if they are each equipped with a shovel, a machete, and a chainsaw. Clearing one acre brings in $1000 in revenue. Each worker’s equipment costs the worker’s employer $150 per month to rent, and each worker toils 40 hours per week for four weeks each month.

a. What is the marginal revenue product of hiring one low-skilled worker to clear woodland for one month?

Instructions: Enter only whole numbers for your answer.

$ ________

b. How much revenue per hour does each worker bring in?

Instructions: Round your answer to two decimal places.

$ ________

c. If the minimum wage were $6.20, would the revenue per hour in part b exceed the minimum wage? Choose:
No or Yes

Answer 1

Answer:

a. $1,000

b. $6.25 per hour

c. Yes

Explanation:

The computation is shown below:

a. The marginal revenue product of hiring low skilled worker is equal to the clearing one in revenue i.e $1,000 as it deals with the additional revenue arise from selling additional units

b. The revenue per hour each worker brings is

= Marginal revenue ÷ Total number of hours for four weeks

= $1,000 ÷ 40 hours × 4

= $1,000 ÷ 160 hours

= $6.25 per hour

c. Since the minimum wage is $6.20

And, the revenue per hour is $6.25 so it exceeded the minimum wage rate by $0.05 taking a difference