Homework SourseConsider the following daily production for Pleasantons thre
Consider the following daily production for Pleasanton\'s three different coffee shops. Each cup of coffee sells for $1.
a.Suppose you are an influential mayor who lieks to plan the economy. There are 8 workers available and your goal is to maximize total coffee production. How many workers should you assign to each coffee shop? Hint: focus on marginal product.
b. Suppose you are a mayor who believes decentralized labor markets can achieve optimal outcomes. Again, there are 8 eager workers (supply of labor is fixed at 8). Find the equilibrium wage; how much coffee will be produced? How does this compare to the previous answer?
| Shop #1 | Shop #2 | Shop #3 | ||||
| Workers | Total Product | Marginal Product | Total Product | Marginal Product | Total Product | Marginal Product |
| 0 | 0 | - | 0 | - | 0 | - |
| 1 | 100 | 100 | 20 | 20 | 40 | 40 |
| 2 | 130 | 30 | 40 | 20 | 70 | 30 |
| 3 | 140 | 10 | 60 | 20 | 100 | 30 |
| 4 | 140 | 0 | 80 | 20 | 110 | 10 |
Solution
Ans.
2 to first
3 to secound
3 to third
This arrangement will maximize sum of marginal products and thus overall output
2 The equilbrium wage will be 20 and output will again be 8.Thus is because wage is equalized with value of marginal product by employers
