Javier is a lawyer who wants to ran a restaurant. So Javier rented a place for 1

Question

Javier is a lawyer who wants to ran a restaurant.

So Javier rented a place for 10400 euro per year.

Hired a waitress, wage is 20 euro per hour, and 30 euro per hour after 40 hours.

Promised waitress 600 euro a week regardless if the restaurant open or not.

For unknown reason, Javier can only created 10 meal per hour.

Cost of raw material is 6 euro per meal

Cost of furnace is 10 euro per hour, but can be opened at 6-minute intervals so cost is 1 euro per meal.

Javier earns 800 euro a week as a lawyer, and can work when he is not operating his restaurant, but he cannot practice law and keep the restaurant open during the same week.

Classify all different types of costs: fixed, variable, or sunk costs.

1. What is the scheme of the marginal cost for meal a week?

2. Which is the average meal cost this week if 370 meals are cooked?

3.What is the minimum price below whcih the restaurant should close?

4. How many meals per week would Javier cook if the price Cadaques was 9.75 euros?

Explanation / Answer

Answer:

Given the information is:

The unskilled workers earned minimum wage is: $7.25 per hour

The highly skilled workers earned wage is: $160 or more per hour

The average earnings of worker is: $18 per hour

(a) The wage differences are solely due to differences in productivity, in this problem we estimate how many times more productive one group is relative to another by taking the ratio of wages.

The average worker is: $18/$7.25 = $2.48

The high wage worker is: $160/7.25 = $22.06

Therefore, the average worker and high wage worker are $2.48 and $22.06 more productive than the minimum wage workers respectively.

(b)

The lawyer will earn: S160*40 = $6,400 per week

The each minimum wage worker will earn: $7.25*40 = $290 per week

(c)

The government revenue from the tax on lawyers is: 0.25*6400 = $1,600

Now, the amount distributed to 20 minimum wage workers, that is: $1600/20 = $80

Thus, each worker minimum wage received from the government is: $80 per week

The weekly transfer by the hours worked per week is: $80/40 = $2 per hour

(d)

The government revenue will equal to $6,400 assuming the lawyer continues to work. Therefore, a weekly transfer is: $6,400/20 = $320. And the hourly transfer is: $200/40 = $5

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