Question

Suppose an employer can hire four low-skilled workers to move dirt with shovels at $5 an hour, or can hire one skilled worker at $24 an hour to move the same amount of dirt with a skid loader. What will the employer do if the minimum wage increases from $5 per hour to $6.50 per hour?

Answer 1

Answer:

Hire the one skilled worker.

Explanation:

Oportunity cost is the cost of choice. Is defined as the value or profit of something that must be forgone to aquire something else.

If the oportunity cost increase, you will do less with your resouces.

If the oportunity cost decrease, you will do more with your resouces.

In this case, the oportunity cost decrease when the low-skilled workers minimum wage increases from $5 per hour to $6.50 per hour.

4 workers * $6.50 per hour = $26

1 skilled worker = $24 an hour

Is cheaper to hire one skilled worker.