A local firm hires $150 of unskilled labour at the minimum wage

A local firm hires $150 of unskilled labour at the minimum wage and constructs a walking track, for which it is paid $180 by the State Government. The firm incurs no other cost, apart from the wage bill, in constructing the track. The government is to charge a fee to users of the track, and the present value of the fees paid is estimated to be $100. Con- sumers place a net present value (net of the fees and any other costs incurred) of $50 on the track’s services. The labour employed to View complete question » A local firm hires $150 of unskilled labour at the minimum wage and constructs a walking track, for which it is paid $180 by the State Government. The firm incurs no other cost, apart from the wage bill, in constructing the track. The government is to charge a fee to users of the track, and the present value of the fees paid is estimated to be $100. Con- sumers place a net present value (net of the fees and any other costs incurred) of $50 on the track’s services. The labour employed to construct the track would otherwise be unem- ployed, and the value of its non-market activity is estimated to be $50. calculate the net benefit of the project to each member of the referent group: the firm consumers labour the government; using the appropriate shadow-price of labour, calculate the efficiency net benefit of the project.


 

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