1.Assume that in 2012 national income in the United States was $11,186.9 billion. In the same year, 137 million workers were employed, at an average wage of $57,526 per worker per year.

2.Marty’s Frozen Yogurt has the production function per day shown in the accompanying table. The equilibrium wage rate for a worker is $80 per day. Each cup of frozen yogurt sells for $2.

3.Patty’s Pizza Parlor has the production function per hour shown in the accompanying table. The hourly wage rate for each worker is $10. Each pizza sells for $2.

4.The production function for Patty’s Pizza Parlor is given in the table in Problem 3. The price of pizza is $2, but the hourly wage rate rises from $10 to $15. Use a diagram to determine how Patty’s demand for workers responds as a result of this wage rate increase.

5.Patty’s Pizza Parlor initially had the production function given in the table in Problem 3. A worker’s hourly wage rate was $10, and pizza sold for $2. Now Patty buys a new high-tech pizza oven that allows her workers to become twice as productive as before. That is, the first worker now produces 18 pizzas per hour instead of 9, and so on.

6.Jameel runs a driver education school. The more driving instructors he hires, the more driving lessons he can sell. But because he owns a limited number of training automobiles, each additional driving instructor adds less to Jameel’s output of driving lessons. The accompanying table shows Jameel’s production function per day. Each driving lesson can be sold at $35 per hour.

Determine Jameel’s labor demand schedule (his demand schedule for driving instructors) for each of the following daily wage rates for driving instructors: $160, $180, $200, $220, $240, and $260.

7.Dale and Dana work at a self-service gas station and convenience store. Dale opens up every day, and Dana arrives later to help stock the store. They are both paid the current market wage of $9.50 per hour. But Dale feels he should be paid much more because the revenue generated from the gas pumps he turns on every morning is much higher than the revenue generated by the items that Dana stocks. Assess this argument.

8.Your local newspaper publishes an article stating that the wage of farmworkers in Mexico is $11 an hour but the wage of immigrant Mexican farmworkers in California is $9 an hour.

9.Research consistently finds that despite nondiscrimination policies, African-American workers on average receive lower wages than White workers do. What are the possible reasons for this? Are these reasons consistent with marginal productivity theory?

10.Wendy works at a fast-food restaurant. When her wage rate was $5 per hour, she worked 30 hours per week. When her wage rate rose to $6 per hour, she decided to work 40 hours. But when her wage rate rose further to $7, she decided to work only 35 hours.

11.You are the governor’s economic policy adviser. The governor wants to put in place policies that encourage employed people to work more hours at their jobs and that encourage unemployed people to find and take jobs. Assess each of the following policies in terms of reaching that goal. Explain your reasoning in terms of income and substitution effects, and indicate when the impact of the policy may be ambiguous.

12.A study by economists at the Federal Reserve Bank of Boston found that between 1965 and 2003 the average American’s leisure time increased by between 4 and 8 hours a week. The study claims that this increase is primarily driven by a rise in wage rates.

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