Homework Clinic
Social Science Clinic => Economics => Macroeconomics => Topic started by: hannahmadyronde on Nov 23, 2022
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Minimum Wage and Efficiency Wages
Suppose there are two types of workers. One type of worker generates a marginal revenue product of $90 an hour and has an opportunity cost of $72 per hour. The other type of worker generates a marginal revenue product of $25 an hour and has an opportunity cost of $20 an hour. What wage will equal the average productivity of the workers? Which workers will choose to work at that wage?
Please round your final answer to two decimal places.
◦ $57.50, both low productivity and high productivity workers
◦ $57.50, low productivity only
◦ $46.00, low productivity only
◦ $46.00, both low productivity and high productivity workers
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$57.50, low productivity only
The average productivity of the workers is the average of the marginal revenue product for the first type of worker (high productivity) and the marginal revenue product for the second type of worker (low productivity).
Average productivity = (90 + 25)/2 = $57.50 = Wage
A worker will decide to work if the wage is greater than the opportunity cost of working.
Because 57.50 is less than $72, high productivity workers will not work.
Because 57.50 is greater than $20, low productivity workers will work.