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Labor markets and wage determinationTable 1. Chocolate chip cookie output and number of workers. Cookies sell for \$2.00 each.
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1) (5 points)​ Labor markets and wage determination
Table 1. Chocolate chip cookie output and number of workers. Cookies sell for \$2.00 each.
Worke
rs
1
2
3
4
5
6
7
8
9
10
output
30.0
58.5
85.5
111.0
135.0
157.5
178.5
198.0
216.0
232.5
a) (1 point) Nick has estimated the number of brownies produced for different numbers of
workers (see table 1). Why does output increase with more workers? Why does output
increase at a diminishing rate? Would output increase at a diminishing rate if there were
b) (1 point) Cookies sell for \$2 each and each requires \$0.75 in ingredients. Graph the
demand for labor as a function of the wage using the data in table 1. What happens to the
number of workers hired when wages go up? How many workers will be hired and how
c) (2 points) Nick could buy a 2​nd​ oven. He estimates that the 2​nd​ oven would raise output
for any given number of workers as indicated in table 2. When his workers form a union,
they gain a wage increase from \$22.50 to \$24.38. What do you expect to happen to
employment and output with one oven? (How many workers will be hired and how much
produced at the new wage.) What would happen if Nick responds to the wage increase by
change any if there is a limited market for chocolate chip cookies so that Nick would
have to lower the price of cookies to sell more?
See table below
Worke
rs
1
2
3
4
5
6
7
8
9
10
ovens
35.0
69.5
103.5
137.0
170.0
202.0
233.0
263.0
291.5
318.5
d) (1 point) Like many retail employers, Nick experiences high turnover among his workers
which forces him to devote much time to hiring and training workers. By establishing
systems for seniority promotion and pension and insurance benefits as well as higher
wages, the union discourages turnover saving Nick money by making each worker more
productive at higher wages. Now draw a hypothetical labor demand curve assuming
higher wages are associated with higher productivity.