A landowner is considering changing the work hours of a tenant farmer. At the current arrangement, the farmer produces 2 additional bushels of grain for every extra hour worked. To willingly accept working one extra hour, the farmer would need to be compensated with at least 1.5 bushels of grain to feel no worse off. From the landowner's perspective, what is the profit-maximizing course of action?

Landowner's Optimal Strategy

Analyzing Economic Incentives

A landowner and a tenant farmer are discussing the farmer's work hours. At their current agreement, the marginal rate at which the farmer can transform an hour of free time into grain is greater than the marginal rate at which the farmer is willing to substitute free time for grain to maintain the same level of satisfaction. Why does this situation create an incentive for the landowner to propose that the farmer work more hours?

A profit-maximizing firm is deciding whether to adjust an employee's work hours. The firm compares the value of the output produced by an additional hour of work against the value of goods required to compensate the employee for that hour of lost free time. Match each scenario describing this comparison to the firm's most profitable course of action.

A firm observes that for a particular employee, the value of the goods produced in an additional hour of work is less than the value of the goods the employee would require as compensation to willingly give up that hour of free time. Given this, the firm can increase its profits by increasing the employee's work hours.

Evaluating Labor Contract Proposals

Analyzing Incentives in a Principal-Agent Relationship

Analyzing Economic Surplus in a Labor Agreement

Optimizing a Labor Agreement