The Solo Coal Mine is the only employer in the small town of Way out there.The market supply of coal miners is Q^s = 0.02W - 400 and Q^d = 500 - 0.02W,where W is the annual wage of a coal miner and Q is the number of coal miners.What wage must be paid at the profit maximizing quantity of coal miners?

Question

Quizplus · Accepted Answer

To find the wage that must be paid at the profit maximizing quantity of coal miners, we need to find the quantity where market supply and demand curves intersect.

Setting the two equations equal:

0.02W - 400 = 500 - 0.02W

Adding 0.02W to both sides:

0.04W = 900

Dividing both sides by 0.04:

W = 22,500

Therefore, the profit maximizing wage is $22,500 per year. However, since the answer choices are rounded, we need to choose the closest one, which is D) $21,667.

The Solo Coal Mine Is the Only Employer in the Small