Higher Wages for Landscaping Workers. Suppose that half of landscaping workers have a marginalrevenue product of $40 and an opportunity cost of $30 and the other half have a marginal-revenue product of $60 and an opportunity cost of $45. A landscaping firm cannot distinguish between the two types of workers. (Related to Application 4 on page 717.)
a. Suppose a landscaping firm offers a wage equal to $41. What is the average productivity of its workforce? On average, what is the firms profit per worker?
b. Suppose the firm increases its wage to $47. What is the average productivity of its workforce? On average, what is the firm s profit per worker?
c. What are the equilibrium wages?