Labor Economics 5th Edition by George Borjas

Exercise 22

Ann owns a lawn mowing company. She has 400 lawns she needs to cut each week. Her weekly revenue from these 400 lawns is $20,000. Given an 18-inch deck push mower, a laborer can cut each lawn in two hours. Given a 60-inch deck riding mower, a laborer can cut each lawn in 30 minutes. Labor is supplied inelastically at $5.00 per hour. Each laborer works 8 hours a day and 5 days each week.
(a) If Ann decides to have her workers use push mowers, how many push mowers will Ann rent and how many workers will she hire
(b) If she decides to have her workers use riding mowers, how many riding mowers will Ann rent and how many workers will she hire
(c) Suppose the weekly rental cost (including gas and maintenance) for each push mower is $250 and for each riding mower is $1,800. What equipment will Ann rent How many workers will she employ How much profit will she earn
(d) Suppose the government imposes a 20 percent payroll tax (paid by employers) on all labor and offers a 20 percent subsidy on the rental cost of capital. What equipment will Ann rent How many workers will she employ How much profit will she earn