Suppose all perfectly competitive fast-food firms are hiring the profit-maximizing quantity of labor and are
paying their workers $7 per hour. Then suppose the government decides to raise the minimum wage to $8 per hour. Then:

a. since the value of the marginal product would exceed the wage, firms would hire more workers.
b. since the value of the marginal product would be less than the wage, firms would lay off some workers.
c. the firms would increase their prices to keep the value of the marginal product equal to the wage.
d. firms would have to exit the industry since the value of the marginal product is less than the wage.
e. firms would be unable to alter their hiring because the minimum wage is set by the government.

P8-4b dropping unfavorable division based on the following analysis of last year's operations of groves, inc., a financial vice president of the company believes that the firm's total net income could be increased by $160,000 if its design division were discontinued. (amounts are given in the thousands of dollars.) required provide answers for each of the following independent situations: a. assuming that total fixed costs and expenses would not be affected by discontinuing the design division, prepare an analysis showing why you agree or disagree with the vice president. b. assume that the discontinuance of the design division will enable the company to avoid 30% of the fixed portion of cost of services and 40% of the fixed operating expenses allocated to the design division. calculate the resulting effect on net income. c. assume that in addition to the cost avoidance in requirement (b), the capacity released by discontinuance of the design division can be used to provide 6,000 new services that would have a variable cost per service of $60 and would require additional fixed costs totaling $68,000. at what unit price must the new service be sold if groves is to increase its total net income by $180,000?