Economic Rationale for Increasing Leisure Time
A landowner employs a tenant farmer whose output depends on the hours worked. The landowner discovers a situation where the rate at which the farmer is willing to trade grain for an extra hour of free time is greater than the rate at which that extra hour of free time reduces the total grain harvest. Explain, from the landowner's profit-maximizing perspective, the economic logic for why it would be beneficial to grant the farmer more free time. In your explanation, describe the relationship between the farmer's preferences, the production possibilities, and how the landowner's surplus is affected.
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A landowner is reviewing the terms for a tenant farmer. Under the current agreement, the farmer has 14 hours of free time per day. The landowner observes that at this point, the farmer would be willing to give up 4 bushels of grain to gain one additional hour of free time. The landowner also calculates that increasing the farmer's free time by one hour would cause the total harvest to decrease by only 2.5 bushels. To maximize personal profit, what is the landowner's best course of action and why?
Analyzing a Landowner's Incentive
Optimizing a Worker's Schedule for Profit
A profit-maximizing landowner observes that for their tenant farmer, the rate at which the farmer is willing to sacrifice grain for an extra hour of leisure is currently 5 bushels. The landowner also knows that giving the farmer an extra hour of leisure would reduce the total harvest by 3 bushels. Based on this information, the landowner should compel the farmer to work longer hours to increase the total grain output.
Economic Rationale for Increasing Leisure Time
A profit-maximizing landowner is determining the daily work hours for a tenant farmer. The farmer must be kept at a minimum level of satisfaction. Match each scenario describing the trade-offs at the current work hours with the landowner's best course of action.
A landowner's profit is the total grain produced by a tenant farmer minus the grain the farmer receives. Currently, the farmer works 12 hours, produces 60 bushels, and receives 30 bushels, leaving the landowner with a profit of 30 bushels. At this point, the farmer is willing to give up 4 bushels of grain for one additional hour of free time. If the landowner grants this extra hour, total production will fall to 57 bushels. If the landowner makes this change, the new profit will be ____ bushels.
A profit-maximizing landowner is considering adjusting a tenant farmer's work hours. Currently, the amount of grain the farmer is willing to trade for an extra hour of free time is greater than the amount of grain that would be lost in production if that hour were taken. Arrange the following steps in the logical order the landowner would follow to realize that increasing the farmer's free time would raise the landowner's profit.
Analyzing Surplus Gains from Adjusting Work Hours
A landowner is analyzing the work arrangement for a tenant farmer. At the current allocation of work and grain, the slope of the farmer's indifference curve (representing the rate the farmer is willing to trade grain for free time) is -4. The slope of the feasible production frontier (representing the rate at which free time can be transformed into grain) is -2.5. To maximize profit, what action should the landowner take?