productivity theory, explain how a change in the minimum
wage affects the employment of unskilled labor
Discussion Question 12: It is always better to hire a more
qualified and productive worker than a less qualified and
productive one regardless of cost. True or false? Explain
Problem 4: Ms. Smith, the owner and manager of the
Clear Duplicating Service located near a university, is
contemplating keeping her shop open after 4pm and until
midnight. In order to do so, she would have to hire
additional workers. She estimated that the additional
workers would generate the following total output (where
each unit of output refers to 100 pages duplicated). If the
price of each unit of output is $10 and each worker hired
must be paid $40 per day, how many workers should Ms.
Smith hire?
Problem 12: Suppose that the production function for a
commodity is given by Q=10 √LK where Q is the quality
of output, L is the quantity of labor, and K is the quantity
of capital.
a) Indicate whether this production function exhibits
constant, increasing, or decreasing returns to scale.
b) Does this production function exhibit diminishing
returns? If so, when does the law of diminishing returns
begin to operate? Could we ever get negative returns?
Problem 13: Indicate whether each of the following
statements is true of false and give the reason.