Question

If Larry starts a new pizza parlor and hires a manager for $30,000 per year, this implies that Question 5 options: 1. Larry values his labor at less than $30,000 per year. 2. pizza parlor managers are inexpensive to hire. 3. Larry values his labor at more than $30,000 per year. 4. the price of pizza will increase if Larry works in the parlor himself.

Answer 1

3. Larry values his labor at more than $30,000 per year

Step-by-step explanation:

Firms demand labour, as per demand (MRPL) downward sloping curve. 'Marginal Revenue product of labour' signifies the additional revenue by hiring of an additional labour, MRPL = MR x MP. Equilibrium wage rate : marginal cost ie wage (W) = marginal revenue ie MRPL of labour.

However, the total value gained by firm due to hiring of an additional labour is VMPL. Value of marginal product is the price value of additional output by hiring an additional labour, VMPL = MR x P. VMPL is more than MRPL, the curve lies higher than it.

So, as mentioned wage (W) = MRPL. However, VMPL > MRPL ie W. So, Larry' paid manager salary $30000 would be less than value of manager's labour

Answer 2

Option 3

Step-by-step explanation:

In simple words, the following case illustrates to the implicit and explicit cost. Implicit cost refers to the cost of loss of profits that one ha to loose for choosing one alternative over other while prolixity costs are the costs necessary to bear for effective operation.

In the given case, if Larry himself do the performance of the manager he might loose up more than $30,000 thus, he will obvious gaining from the manager more than 30,000 implicitly.