Exhibit 10-3 Supply and demand curves for food servers

-In Exhibit 10-3,assume that both input and output markets are perfectly competitive.If one additional server increases the number of meals sold by four per day and each meal sells for $10,each additional food servers will be paid:

Question

Exhibit 10-3 Supply and demand curves for food servers
 
-In Exhibit 10-3,assume that both input and output markets are perfectly competitive.If one additional server increases the number of meals sold by four per day and each meal sells for $10,each additional food servers will be paid:

Quizplus · Accepted Answer

From the demand curve, we can see that each additional server increases the quantity demanded by 4 meals per day, which means the marginal revenue product (MRP) of each server is 4 * $10 = $40 per day.

From the supply curve, we can see that the market wage rate (the amount each server is willing to work for) for 1 server is $24 per day. However, since the MRP is greater than the wage rate, firms will be willing to pay more to attract additional servers.

Therefore, the equilibrium wage rate for each additional server is the MRP, which is $40 per day.

Exhibit 10-3 Supply and Demand Curves for Food Servers