LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 10, Problem 5P
(a)
To determine
Find the firm’s demand function for labor.
(b)
To determine
Identify the number of workers provided by the union, the wage set by the firm, output produced by the workers, profit earned by the firm, and total income of the 225 union workers.
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Consider a firm that faces a constant per unit price of $1,200 for its output. The firm hires workers, E, from a union at a daily wage of w, to produce output, q, w here q = 2E1/2 Given the production function, the marginal product of labor is 1/E1/2 . There are 225 workers in the union. Any union worker who does not work for the firm can find a nonunion job paying $96 per day. a. What is the firm’s labor demand function? b. If the firm is allowed to specify w and the union is then allowed to provide as many workers as it wants (up to 225) at the daily wage of w, what wage will the firm set? How many workers will the union provide? How much output will be produced? How much profit will the firm earn? What is the total income of the 225 union workers?
Suppose that a car factory initially hires 1,600 workers at $20 per hour and that each worker works 40 hours per week. Then the factory unionizes, and the new union demands that wages be raised by 25 percent. The firm accedes to that request in collective bargaining negotiations but then decides to cut the factory’s labor force by 30 percent due to the higher labor costs.
Consider a firm which produces q units of output using L units of labour and whose market demand for labour is given by L* = 57- w/(14p), if w/(14p)<57 and L*=0, otherwise where p denotes the price of output and w denotes the price of labour. What is the change in the profit of the firm if the price of labour changes from w= 1 to w = 4 assuming the price of output is p=57?
Chapter 10 Solutions
LABOR ECONOMICS
Ch. 10 - Prob. 1RQCh. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 10RQ
Ch. 10 - Prob. 11RQCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10PCh. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Major League Baseball players are not eligible for...Ch. 10 - Prob. 15P
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- Assume that the labor supply curve is S(w)=2w-20 and the demand curve is D(w)=40-w. In case of a non-discriminating monopsony, the marginal cost is MCN(W)=w-10. Note that MCN is the marginal cost in terms of workers. What is the change in the number of workers in the non-discriminating monopsony compared to perfect discriminating monopsony? Multiple Choice O O 5 decrease in workers 10 decrease in workers 5 increase in workers 10 increase in workersarrow_forwardA meeting of representatives for labor and management to negotiate contracts is calledarrow_forwardSuppose that Zamboni Enterprises is the only company that sells zambonis (ice resurfacing machines). To produce the machines, the company hires assembly workers. Since these workers can work in many different companies, Zamboni Enterprises must pay them the market wage, which is equal to $6. The number of zambonis that the company produces, which is denoted by y, is proportional to the number of assembly workers that it hires, which are denoted by N; in particular, the production function is given by y=0.76N. The economywide demand for zambonis is given by the following demand function: y=2191-219p, where y is the number of zambonis that consumers are willing to purchase at price p. Given this market structure, how many assembly workers will Zamboni Enterprises choose to hire? How many zambonis will Zamboni Enterprises produce and sell?arrow_forward
- Suppose that Zamboni Enterprises is the only company that sells zambonis (ice resurfacing machines). To produce the machines, the company hires assembly workers. Since these workers can work in many different companies, Zamboni Enterprises must pay them the market wage, which is equal to $6. The number of zambonis that the company produces, which is denoted by y, is proportional to the number of assembly workers that it hires, which are denoted by N; in particular, the production function is given by y=0.76N. The economywide demand for zambonis is given by the following demand function: y=2191-219p, where y is the number of zambonis that consumers are willing to purchase at price p. Given this market structure, how many assembly workers will Zamboni Enterprises choose to hire? How many zambonis will Zamboni Enterprises produce and sell? What will be the price of a zamboni? If the market for zambonis were competitive, how many zambonis would be produced? If the market for…arrow_forwardSuppose that Zamboni Enterprises is the only company that sells zambonis (ice resurfacing machines). To produce the machines, the company hires assembly workers. Since these workers can work in many different companies, Zamboni Enterprises must pay them the market wage, which is equal to $6. The number of zambonis that the company produces, which is denoted by y, is proportional to the number of assembly workers that it hires, which are denoted by N; in particular, the production function is given by y=0.76N. The economywide demand for zambonis is given by the following demand function: y=2191-219p, where y is the number of zambonis that consumers are willing to purchase at price p. If the market for zambonis were competitive, how many zambonis would be produced? If the market for zambonis were competitive, how many assembly workers would be hired? If the market for zambonis were competitive, at what price would zambonis be sold?arrow_forwardThe below table shows the output associated with each quantity of labor, assuming the level of capital is fixed. Assume the price of a unit of output is $2 and the wage is equal to $11. How many workers would the firm hire? Show your work. Number of Workers Output per hour 0 0 1 8 2 14 3 18 4 20arrow_forward
- A firm pays a price w for each unit it employs of its labor x. It also incurs fixed costs equal to F. If the firm receives a price p for each unit of output produced, and it produces output given by f(x) = 4x¹/4, how much of labor x should it employ to maximize profits? Verify whether your answer is indeed a maximum.arrow_forwardWorkers Total Product Product price 0 0 4 1 16 4 2 26 4 3 34 4 4 40 4 5 44 4 At a wage rate of $15, the firm will choose to employ how many workers?arrow_forwardImagine 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.arrow_forward
- The labour supply function faced by a business operating under monopsony in the labour market and in perfect competition in the goods and services market is as follows Ls = 10+0,5L. The production function of the firm is Q = L2-16L. What is the wage level that the firm will pay to the workers when the firm sells its goods for 5 dollar in the market?arrow_forwardConsider a firm that sells its output in a perfectly competitive product market and hires labour in a perfectly competitive labour market. The value of the marginal product of labour (in pounds) is given by: VMPE=20-5E Assuming that the firm is a profit maximiser and can hire labour at £W per unit, derive its labour demand function. Given that there are 50 identical firms (like the firm described in (b)) in the industry, find the market labour demand. If the supply function of labour to this market is: WS=30Warrow_forwardB. Consider a firm who sells output at p=10 and has a short run production function Q(L)=20L-L2. Its wage rate function is w=40+2.5L. Compute for the rate of monopsonistic exploitation and interpret the computed value.arrow_forward
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