EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Question
Chapter 13, Problem 13.7P
a
To determine
To find:Number of workers to be hired and wage rate to be paid.
b)
To determine
To find:Number of workers to be hired and
c)
To determine
To plot:Graphical representation of workers hired against different wage rate.
d)
To determine
To ascertain:Difference in imposition of minimum wage under monopsony and
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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.
B. 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.
Suppose the firm is a monopsonist, how much labor will it hire to maximize profits?
3. A monopsonist's inverse demand for labor can be written as D-1(w) = VMP(E)
0.005ED. Labor is supplied to the firm according to the inverse supply function S-(w)
s(E) = w = 5+0.01E,.
= 40 –
(a) Assume that it is a short-run problem and state the monopsonist's PMAX problem
mathematically.
(b) Define the monopsonist's cost and find the marginal cost.
(c) How much labor does the monopsony firm hire? At what wage rate does it hire workers?
(d) How much labor would the monopsonist approximately hire if it hired as if a perfectly
competitive firm does? At what wage rate would it hire workers approximately?
(e) Draw a graph.
(f) Approximately calculate producer surplus (PS), worker surplus (WS), and dead weight
loss (DWS) for (Emono: Wimono) and (E*, w*). State the implication of this exercise.
(g) How much labor does the monopsony firm hire and at what wage when it must pay when
it must pay a minimum wage of $25? State the implication of this exercise.
Chapter 13 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 13.1 - Prob. 1MQCh. 13.1 - Prob. 2MQCh. 13.2 - Prob. 1TTACh. 13.2 - Prob. 2TTACh. 13.3 - Prob. 1MQCh. 13.3 - Prob. 2MQCh. 13.5 - Prob. 1MQCh. 13.6 - Prob. 1MQCh. 13.6 - Prob. 1TTACh. 13.6 - Prob. 2TTA
Ch. 13.6 - Prob. 1.1TTACh. 13.6 - Prob. 2.1TTACh. 13 - Prob. 1RQCh. 13 - Prob. 2RQCh. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Prob. 7RQCh. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - Prob. 10RQCh. 13 - Prob. 13.1PCh. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Prob. 13.6PCh. 13 - Prob. 13.7PCh. 13 - Prob. 13.8PCh. 13 - Prob. 13.9PCh. 13 - Prob. 13.10P
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- You are a labor economist trying to evaluate whether the labor market for computer scientists is competitive or monopsonistic. Based on previous research, you know that the production function for computers depends only on labor input: Y = -0.5L^2 + 10L; where Y is the output of computers and L is the quantity of labor used. The price of a computer is p = 2. You also know that the labor supply, as a function of the wage, for computer scientists is the following, where w is the wage per unit of labor: L = -10 + w. a. Find the equilibrium wages and employment (wc; Lc) that would prevail if the market for computer scientists were competitive. [Remember that a competitive firm takes the wage as given : that is, it assumes that the quantity of workers that it hires has no effect on the price of the next worker. (Of course, the equilibrium wage must equate demand and supply)].arrow_forwardc) The diagram below shows the supply, demand and marginal expense curve for labor in a monopsony. Given this information, answer the following questions: Wage 1) ii) 111) iv) 3 A B C E H ME S Labor hours per week What quantity of labour will a monopsonist employ? Which region represents the monopsonist total expense for labour? If there were no monopsony, and write an expression using the letter above to represent how much will the total expense of labour increase by. Give a realistic example of a monopsony.arrow_forwardThe following table shows the relationship between workers and output for a factory in the short run, with capital held constant. This firm is a monopoly in the output market, and price and marginal revenue for the firm are also given in the table. Find the marginal revenue product of labor (MRPL). Marginal Physical Product (MPPL) Labor Input 0 1 2 3 4 5 If the wage rate is $408, this firm will hire 0 20 14 12 9 3 workers. In general, a monopolist will employ Price of Output (P) 40 39 38 37 36 35 Marginal Revenue (MR) 38 36 34 32 30 workers than a similar competitive firm. MRPL 760 504 408 288 90arrow_forward
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