QUESTION #1: 40 POINTS Assume: The firm is producing gloves in a perfectly competitive market structure where the market determined price is equal to $15 per pair of gloves. Productive resources required to produce gloves include, for example: 1. energy (electricity, oil); 2. cable and telephone; 3. such as leather, insulation, thread; 4. labor (cut, sew, iron, assemble, inspect) 5. machinery; among other needed resources. Fixed Productive Resources: Machines - sewing & cutting machines, ironing press Fixed Costs: cost of capital Variable Productive Resources: Energy, Cable, Telephone and other utilities; Materials such as leather, insulation, thread; Labor Variable Costs: Labor Costs (ignoring the costs of other variable resources). Output (Q): number of pairs of gloves produced per day Units of Labor: see table below; to increase production per day, the firm will need to hire additional workers per day Wage Rate: $30 per worker hour; Capital: 1 Sewing Machine; 1 Cutting Machine; 1 Ironing Press Rental Cost: 1 Sewing Machine: $15 per hour 1 Cutting Machine: $13 per hour 1 Ironing Press: $14 per hour Total Rental Cost Per Day: $42 rental cost per hour * 8 hours = $336 total rental cost ($15+ $13 +$14 = $42) per day Total Labor Cost Per Day: $30 wage rate per hour* (# of workers per day) * 8 hours For example: hire one worker for an 8-hour day: $30 *1*8 = $240 per day For example: hire two workers for 8-hour days: $30*2*8 = $480 per day