Coldbox Corporation hires its workers in a perfectly competitive labor market and produces and sells frozen peas in a perfectly competitive product market. The market price for frozen peas is $4 per bag. The table below shows Coldbox' short-run production of frozen peas. Labor is the only variable input. Coldbox Corporation's fixed cost is $500. Number of Workers Bags of frozen peas 0 0 1 60 2 140 3 250 4 320 5 380 6 400 a) If the wage is $200 per worker, identify the profit-maximizing number of workers for Coldbox. Explain using marginal analysis. b) If the price of frozen peas decreases by $2 per bag, would the number of workers hired by Coldbox be more than, less than, or equal to the number of workers you identified in part (a) ? Explain. c) Suppose that Coldbox hires workers from a monopsonistic labor market. Would the wage be higher, lower, or equal to the equilibrium wage in a perfectly competitive market? Explain.
Coldbox Corporation hires its workers in a
| Number of Workers | Bags of frozen peas |
| 0 | 0 |
| 1 | 60 |
| 2 | 140 |
| 3 | 250 |
| 4 | 320 |
| 5 | 380 |
| 6 | 400 |
a) If the wage is $200 per worker, identify the profit-maximizing number of workers for Coldbox. Explain using marginal analysis.
b) If the price of frozen peas decreases by $2 per bag, would the number of workers hired by Coldbox be more than, less than, or equal to the number of workers you identified in part (a) ? Explain.
c) Suppose that Coldbox hires workers from a monopsonistic labor market. Would the wage be higher, lower, or equal to the equilibrium wage in a perfectly competitive market? Explain.
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