Mountain Breeze supplies air filters to the retail market and hires workers to a

Question

Mountain Breeze supplies air filters to the retail market and hires workers to assemble the components. An air filter sells for $28, 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?

Instructions: Enter your responses as whole numbers.

Sandra will be paid $ per month.

Bobby will be paid $ per month.

Explanation / Answer

Workers are paid the value of their marginal product. Here value of the marginal product for Sandra is (28 - 1) x 60 = 1620. The cost of filter is subtracted from their pay because they use the filter in the product. For Bobby, the value of marginal product is (28 - 1)*70 = 1890

Hence, Sandra will be paid $1620 per month.

Bobby will be paid $1890 per month.

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