Asked by Holly Bienias on Jul 04, 2024
Verified
The marginal product of labor at One Guy's Pizza is 
One Guy's pays each unit of labor the minimum wage of $6.00. Also, One Guy's can sell all the pizza it produces for $12. What is the optimal level of labor employment for One Guy's pizza? If the minimum wage is raised to $8, what impact will this have on One Guy's optimal labor employment level?
Marginal Product
The additional output that is produced by using one more unit of a particular input, holding other inputs constant.
Optimal Labor Employment
The most efficient and effective level of staffing for a business or organization to maximize productivity and minimize costs.
Minimum Wage
The lowest legal salary that employers can pay their employees, often set by government laws.
- Elaborate the optimal scale of labor employment with reference to the marginal product of labor, wage rates, and marginal revenue.
- Analyze the impact of wage rate changes on the employment of labor.
- Explore the effects of regulatory changes, such as minimum wage increases, on employment levels.
Verified Answer
ZK
Zybrea KnightJul 07, 2024
Final Answer :
One Guy's marginal revenue of the product of labor is: 
To maximize profits, One Guy's must equate the marginal revenue of the product of labor to the wage rate. This is: 
Thus, One Guy's optimal employment of labor is 64 units. If the minimum wage is raised to $8, the optimal level of employment becomes 
That is, One Guy's optimal employment of labor falls to 36 units if the minimum wage rises by one third.
To maximize profits, One Guy's must equate the marginal revenue of the product of labor to the wage rate. This is: Thus, One Guy's optimal employment of labor is 64 units. If the minimum wage is raised to $8, the optimal level of employment becomes That is, One Guy's optimal employment of labor falls to 36 units if the minimum wage rises by one third.
Learning Objectives
- Elaborate the optimal scale of labor employment with reference to the marginal product of labor, wage rates, and marginal revenue.
- Analyze the impact of wage rate changes on the employment of labor.
- Explore the effects of regulatory changes, such as minimum wage increases, on employment levels.