LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 3, Problem 6RQ
To determine
Explain the factor that determines the elasticity of the industry’s labor demand curve.
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A firm’s technology requires it to combine 5 person-hours of labor with 3 machinehours to produce 1 unit of output. The firm has 15 machines in place and the wage rate rises from $10 per hour to $20 per hour. What is the firm’s short-run elasticity of labor demand?
A firm faces a perfectly elastic demand for its output at a price of $6 per unit of output. The firm, however, faces an upward-sloped labor supply curve ofE = 20w - 120where E is the number of workers hired each hour and w is the hourly wage rate. Thus, the firm faces an upward-sloped marginal cost of labor curve ofMCE = 6 + 0.1EEach hour of labor produces five units of output. How many workers should the firm hire each hour to maximize profits? What wage will the firm pay? What are the firm’s hourly profits?
Explain the relationship between the own-wage elasticity of labor demand and
output demand elasticity.
labour costs as a share of total costs of production.
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Similar questions
- Suppose the firm only produces good X and that the price of good Y, a substitutegood, decreases. What will happen to the optimal quantity of labor the firm willhire? Explain.arrow_forwardBased on the table for a perfectly competitive firm above, if the wage rate for labor is $15, how many units of labor should the firm hire?arrow_forwardExplain factors affecting labour of supplyarrow_forward
- Labor demand In the long-run:describe what a firm will do when its long-run condition is not met, i.e, when will it hire more or less labor?arrow_forwardExplain how the relationship between elasticity of demand for the product and labor would affect your major or specialization while you are studying at a higher education institution.arrow_forwardSuppose a firm purchases labor in a competitive labor market and sells its product in a competitive product market. The firm’s elasticity of demand for labor is -0.4. Suppose the wage increases by 5 percent. What will happen to the number of workers hired by the firm? What will happen to the marginal productivity of the last worker hired by the firm?arrow_forward
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