Ms. Moneynickel operates a retail store in the local mall. The marginal product of labor at the mall is a function of employee effort level. The marginal product of employee effort is: MP_e(e) = 20 - e. Ms. Moneynickel can sell all the product she stocks for $20. Employees determine their effort level according to the function: e = 10 (w -
), where
is the minimum wage. Currently, the minimum wage is $6. The marginal cost to Ms. Moneynickel of effort is: MC(e) =
. What is the wage rate Ms. Moneynickel should offer her employees to maximize profits? If the minimum wage is increased by $1, how much should Ms. Moneynickel increase the wage rate paid to her employees?

Question

Ms. Moneynickel operates a retail store in the local mall. The marginal product of labor at the mall is a function of employee effort level. The marginal product of employee effort is: MP_e(e) = 20 - e. Ms. Moneynickel can sell all the product she stocks for $20. Employees determine their effort level according to the function: e = 10 (w -

), where

is the minimum wage. Currently, the minimum wage is $6. The marginal cost to Ms. Moneynickel of effort is: MC(e) =

. What is the wage rate Ms. Moneynickel should offer her employees to maximize profits? If the minimum wage is increased by $1, how much should Ms. Moneynickel increase the wage rate paid to her employees?

Quizplus · Accepted Answer

The Answer of Ms. Moneynickel operates a retail store in the local mall. The marginal product of labor at the mall is a function of employee effort level. The marginal product of employee effort is: MP_e(e) = 20 - e. Ms. Moneynickel can sell all the product she stocks for $20. Employees determine their effort level according to the function: e = 10 (w - ), where is the minimum wage. Currently, the minimum wage is $6. The marginal cost to Ms. Moneynickel of effort is: MC(e) = . What is the wage rate Ms. Moneynickel should offer her employees to maximize profits? If the minimum wage is increased by $1, how much should Ms. Moneynickel increase the wage rate paid to her employees?

Ms Moneynickel Operates a Retail Store in the Local Mall