The American Whey is a firm that makes American “cheese” in a perfectly competitive market and is earning normal economic profit in the long-run equilibrium. Assume that American cheese producers hire workers from a perfectly competitive labor market.
(i) Draw a graph of labor supply and demand for the market and typical firm with relevant cost and price/revenue curves. Assume the market wage rate increases in order to attract more workers to “whey-ing in” as industry ads have put it.
(ii) Show the effect of the wage increase on the graphs, labeling all changes in the market and firm.
(iii) What will happen to the marginal revenue product of the last worker hired by American Whey? Explain.
(iv) American Whey begins adding capital equipment – “whey” out machines – to offset the costs of labor employing the cost-minimizing combination of inputs. The marginal product of labor is 30 blocks of cheese per worker hour and the wage rate is $15 per hour. The marginal product of the whey machine is 60 blocks per machine- hour. What is the hourly operational price of a machine?
(v) American Whey’s profits have curdled. They have hired you to advise them about what combination of machines and workers would be the most profit maximizing ratio. What do you tell them?
pls I need help
First off you capitalist pig The American Whey company is abhorrent. During the 1800s they pushed indigenous peoples off their lands in order to establish dairy farms. They have DoD contracts to supply powdered milk. They are owned by an old and wealthy family going back to the colonial days. They also pushed into South America along with oil companies in the 60s and 70s. Not to mention their union-busting tactics. They suck.
So what I'd tell them is to face the fucking wall.
Did you read those leaked papers on American Whey's environmental "standards"? Just about killed an entire watershed with their pollution, now the local towns' fishing/boating industry has been ruined and the whole region has been driven into poverty besides the American Whey factory town.