Imagine there is a firm that only uses labor to produce goods and that its production function is given by Y(L)=5L-L^2. The price of the firm’s output is equal to 1. Let’s assume the firm is a price taker on the product market but is a local monopsony for employment. Imagine that its marginal cost is given by 2+L. Imagine that labor supply is given by 1+L How much labor does the firm want to use? What will be the wage it pays? How many people will work if the government imposes a minimal wage of 2.25? How will this affect the firm’s profit? Calculate and compare before and after the introduction of the minimum wage.

Imagine there is a firm that only uses labor to produce goods and that its production function is given by Y(L)=5L-L^2. The price of the firm’s output is equal to 1. Let’s assume the firm is a price taker on the product market but is a local monopsony for employment. Imagine that its marginal cost is given by 2+L. Imagine that labor supply is given by 1+L How much labor does the firm want to use? What will be the wage it pays? How many people will work if the government imposes a minimal wage of 2.25? How will this affect the firm’s profit? Calculate and compare before and after the introduction of the minimum wage.

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: The Markets For The Factor Of Production

Section: Chapter Questions

Problem 3PA

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