Question

Mountain Breeze supplies air filters to the retail market and hires workers to assemble the components. An air filter sells for $26, and Mountain Breeze can buy the components for each filter for $1. Sandra and Bobby are two workers for Mountain Breeze. Sandra can assemble 60 air filters per month and Bobby can assemble 70. If the labor market is perfectly competitive, how much will Sandra and Bobby be paid?

Answer 1

Answer:

The total amount Sandra was paid=$1,500

The total amount Bobby was paid=$1,750

Explanation:

Step 1

Determine the net loss or profit from sales as shown;

profit=sale price-purchase price

where;

sale price=$26

purchase price=$1

replacing;

profit=26-1=$25

Step 2

In a perfectly competitive labor market, the labor market defines the price of labor. In our case,

The value of each person marginal product can be expressed as;

Value of marginal product for Sandra=(25×60)=$1,500

Value of marginal product for Bobby=(25×70)=$1,750

The total amount Sandra was paid=$1,500

The total amount Bobby was paid=$1,750