ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- Which of the following statements about occupational licenses is not true? Select the correct answer below: Occupational licenses represent a barrier to entry to certain industries. Occupational licenses can lead to higher prices and less consumer choice. Occupational licenses show that a worker has completed a certain type of education or passed a certain test. The government has decided that the additional information provided by licenses does not outweigh the negative effect on competition.arrow_forwardIf an industry is monopolized, then Labour Demand will be below the Labour Demand under competition. However, if the firm is also a monopsonist than labour demand can be either larger or smaller than under competition. True or Falsearrow_forwardThe demand for labor for a firm operating in a perfectly competitive output market equals ____. The demand for labor for a firm with market power in the output market equals ______. Would you expect the presence of labor unions to lead to higher or lower pay for worker-members? Would you expect a higher or lower quantity of workers hired by those employers? Explain briefly.arrow_forward
- Assume a monopsony uses only one factor, i.e. labor, L, to produce a final good, Q, which is sold in a competitive market at the price p = 1 to maximise profits. The production function of the monopsonist is given by Q (L) = 100L - 1L². The inverse supply curve for labor is w(L) = 2 20 + 2 L. a. Derive and describe the monopsony's inverse demand curve for labor. b. Describe algebraically and graphically how many units of labor the monopsony hires and at what wage. Describe the nature of monopsony power and provide economic intuition.arrow_forwardThe marginal expenditure of a monopsony buyer is as follows: ME = P + (dP/dQ)Q P = factor's market price & Q = quantity of the factor sold a) Demonstrate that the marginal expenditure faced by the monoposonist is equal to: ME = P(1 + 1 / elasticity of supply) b) Show that the marginal expenditure on the good will always be greater than or equal to the price of the good c) Utilize the formula you derived to explain why, if the buyer's side were competitive, marginal expenditure would equal the market price d) Will the factor's market price be higher or lower under a monoposonist buyer than in a perfectly competitive market?arrow_forwardDraw labor supply and demand curves in equilibrium under perfect competition.Be sure to label the two curves, the axis, market clearing wage, and the equilibrium of unemployment and worker/producer surpluses.arrow_forward
- A monopsony company has 10 employees each earning $25 an hour. The company decided to hire a new employee at a rate of $30 an hour. The Marginal Labour Cost for employee number 11 is $5 $30 $80 $25 $55arrow_forwardWhich of the following statements are correct regarding the difference between markets and firms? Working in a firm involves accumulation of firm-specific assets that will be lost if the connection to the firm is severed. It is possible to employ division of labour within firms, while it is not possible in markets. Markets involve a decentralisation of power, while firms represent a concentration of economic power. Transactions within firms operate as contracts. Market transactions are not contracts.arrow_forwardMaria is an industrial engineer at a Nissan plant. Using the interdependence principle, explain why and how she should change production plans if one of her engine suppliers cuts the price they charge Nissan by 50%. What about if workers unionize and demand a 12% across-the-board pay raise?arrow_forward
- Consider a third pricing scheme that the union in Solved Problem 12.2 might use. It sets a wage, , and lets the firms hire as many workers as they want (that is, the union does not set a minimum number of hours), but requires a lump-sum contribution to each worker’s retirement fund. What is such a pricing scheme called? Can the union achieve the same outcome as it would if it perfectly price discriminated? (Hint: It could set the wage where the supply curve hits the demand curve.) Does your answer depend on whether the union workers are identical? Solved Problem 12.2 Competitive firms are the customers of a union, which is the monopoly supplier of labor services. Show the union’s “producer surplus” if it perfectly price discriminates. Then suppose that the union makes the firms a take-it-or-leave-it offer: They must guarantee to hire a minimum of hours of work at a wage of , or they can hire no one. Show that by setting appropriately, the union can…arrow_forwardIf an industry is monopolized, then Labour Demand will be below the Labour Demand under competition, unless the firm is also a monopsonist. True Falsearrow_forwardProduction for which P = CPT enables the competitive producer to maximize profits or minimize losses. True or falsearrow_forward
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