Question

(20 points) Suppose prisons historically have required inmates to perform, without pay, various cleaning and food preparation jobs within the prison. Now, suppose that prisoners are offered paid work in factory jobs within the prison walls and that non-prisoners now perform the cleaning and food preparation tasks for a wage (non-prisoners used to do the factory work). Would you expect to see any differences in the amount of capital used to perform these tasks? Explain using the long run production and cost functions. 5.

Answer 1

Answer. Historically, prisoners were required to perform the various tasks without getting paid. So, the money wages are zero to prisoners at that time. So, more labour can be hired at zero marginal cost. At that time, the tasks involved more oof labour intensive techniques and less of capital intensive techniques.

But now, non prisoners are hired to do the tasks, and they are also get paid. It means the marginal cost of hiring an additional worker is no more zero. It will be greater than zero and now the technology used in these process are very much advanced. The prisoners belongs to unskilled labour force and the non prisoners that are hired, belongs to skilled working class. So, we can say that over the period of time, technology has improved and the demand for labour has shifted from unskilled labour force to skilled labour force.