A firm sells bagels for 50 cents each. With 10 workers the firm produces 100 dozen per hour, and with 12 workers it produces 123 dozen per hour. If the firm has 12 workers at the competitive equilibrium, the workers are earning $____ per hour assuming an average 8-hour shift per worker.
A) 8.63
B) 8.23
C) 7.94
D) 7.74

Question

Quizplus · Accepted Answer

The firm produces 123 dozen bagels per hour with 12 workers. Since there are 12 dozen bagels in a gross, the firm produces 1025 bagels per hour. With bagels selling for 50 cents each, the firm earns $512.50 per hour. If each worker works an 8-hour shift, the firm pays $12 workers $8 per hour, or a total of $96 per hour. Therefore, the workers are earning $512.50 - $96 = $416.50 per hour, or $416.50 / 12 = $34.71 per worker per hour.

A Firm Sells Bagels for 50 Cents Each