Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 25

You are the manager of a large but privately held online retailer that currently uses 17 unskilled workers and 6 semiskilled workers at its warehouse to box and ship the products it sells online. Your company pays its unskilled workers the minimum wage but pays the semiskilled workers $9.75 per hour. Thanks to government legislation, the minimum wage in your state will increase from $7.25 per hour to $8.15 per hour on July 24, 2013. Discuss the implications of this legislation for your company's operations and in particular the implications for your optimal mix of inputs and long-run investment decisions.