Economics 14th Edition by James Gwartney,Richard Stroup, Russell Sobel ,David Macpherson

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Leisure Times, Inc., employs skilled workers and capital to install hot tubs. The capital includes the tools and equipment workers use to construct and install the tubs. The installation services are sold in a competitive market for $1,200 per hot tub. Leisure Times is able to hire workers for $2,200 per month, including the cost of wages, fringe benefits, and employment taxes. As additional workers are hired, the increase in the number of hot tubs installed is indicated in the table.

a. Indicate the marginal product and MRP schedules of the workers.
b. What quantity of workers should Leisure Times employ to maximize its profit?
c. If a construction boom pushes the wages of skilled workers up to $2,500 per month, how many workers would Leisure Times employ to maximize its profit?
d. Suppose that strong demand for hot tubs pushes the price of installation services up to $1,500 per month. How would this affect employment of the skilled workers if the wage rate of the workers remained at $2,500 per month?