LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 4, Problem 13P
To determine
The market clearing wage, number of workers employed,
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Suppose that demand is given by p=10Y^(-1/5) and labor supply is w=4L^(2)
If marginal product is 10 and market price is 4 then
a. What is the wage in a competitive market
b. What is the wage in a market where the firm had monopoly power in the goods market
c. What is the wage in a market where the firm has monopoly power in the goods market
Consider the labour market for farms during the harvest season. Assume the market is perfectly competitive, with a labour demand function QD = 10-P and a labour supply function QS = 3P, where P is the wage.
a) What are the consumer (farm owners) surplus and producer (farm workers) surplus in equilibrium?
b) What is the price elasticity of demand at the equilibrium?
c) Suppose the government subsides the farm owners (consumers) $1 for every unit of labour purchased. Then, compute the quantity of labour traded in the market, the wage received by the workers and the wage paid by the farm owners.
d) Calculate the consumer surplus and producer surplus in the presence of the subsidy in part c).
Economic theory states that a wage set about the equilibrium will create a surplus of labor. Are unions creating a surplus of labor?
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- (1) If the demand for product Y increases significantly, then A- the demand for the labor used to make Y decreases. B-the quantity of labor supplied to produce Y will decrease. C-the supply of labor to produce Y will increase. D-only the quantity demanded of labor increases E-the demand for the labor used to make Y increases (2)If the wage in a perfectly competitive labor market is $15 and the marginal product of the last worker employed is 3 units, what must be the market price for the good being produced? Assume a perfectly competitive output market. A- $5. B-$12. C-$15. D-$18. E-$45arrow_forwardAnswer it correctly please. I ll rate accordingly with multiple votes. Typed answer only. In Market B, the market wage is w=20. Supply for labor is given by S(w)=8w, and demand for labor is D(w)=180-w. The price of output for the firms in this market is p=10. At the equilibrium, what is the marginal product of labor? (Just enter the number, no units)arrow_forward6. Q) The market demand for the output is P = 80 – Q, where Q is the output level and P is the price per unit of output. A firm’s production function is Q = 0.5L, where Q is the output level, and L is the amount of labor. If the labor supply function is PL = 10 + 0.5L, what is the price of labor at the competitive equilibrium in the labor market? Question 71 options: $20 $25 $30 $40 None of the above.arrow_forward
- part one: Suppose the demand for labor is given by W = 25 – 0.2L and the supply is given by W = 10+ 0.3L. What is the equilibrium wage rate? a.$20.2 b.$19 c.$19.4 d.$19.8 part two: Suppose the demand for labor is given by W = 250 – 0.05L, and the number of workers available is L = 3,000. What is the equilibrium wage rate? a.$110 b.$100 c.$130 d.$120 part three: Suppose the demand for labor is given by W = 250 – 0.05L, and the number of workers available is L = 3,000, and the labor union wants to set a minimum wage of $140. What is the number of workers unemployed? (Hint: Unemployed workers are the excess supply of labor.) a.800 b.1,000 c.600 d.400arrow_forwardLABOR DEMAND, PART 1 Suppose output, Q, is produced by labor, L, and capital, K, according to the following function: Q = K ½ L½.. Suppose the firm sells each unit of output in a competitive market for a price P = $100. Suppose the firm hires each unit of labor in a competitive market for a wage W = $25. Suppose the firm has to make do for now with a stock of capital K = 49; moreover, suppose each unit of capital costs R = $75. A. How much labor will be demanded by the firm? Demonstrate and explain. B. At the "optimal" quantity of labor, what is the capital-to-labor ratio K/L? Demonstrate and explain. C. Utilizing the "optimal" quantity of labor, how much profit will the firm earn?arrow_forwardHow do you legally reduce labor surplus? Give an example for each.arrow_forward
- Consider the graph at right for a monopsonistic labor market. The competitive wage is $750.00 per hour, and the competitive labor use is 62.50 workers. In a monopsonistic labor market, the amount of labor used will be 41.7 workers and the wage will be $ per hour (round your answer to the nearest penny). (Round all of the following answers to the nearest dollar.) In a monopsonistic labor market, consumer surplus will be $ ; the monopsonistic labor market producer surplus will be area $, and the monopsonistic labor market producer deadweight loss will be $ w, wage per hour 1400.00- 1200.00- 1000.00- 800.00- 600.00- 400.00- 200.00- Monopsonistic Labor Market 833.33 0.00+ 0.0 41.7 40.0 L, Workers per hour 80.0 ME S D Qarrow_forwardConsider a labour market where labour demand and supply are given by w = 240−2LD and w = 30+4LS , respectively, the competitive market equilibrium quantity of labour is 35, the wage is 170, consumer surplus is 1225 and producer surplus is 2450. 1.If the owners collude, calculate the new equilibrium quantity of labour and wage. 2.Continue with the previous part. Calculate the new consumer surplus and producer surplus. 3 .Continue with the previous part. Briefly explain if, compared to the competitive market equilibrium, the owners and/or players are better off and if the overall wellbeing of the league has increased or decreased.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
- Consider two labour markets that are identical, aside from the fact that one is a monopsony and the other is perfectly competitive. a) Which labour market would you expect to pay the higher wage? Explain. b) Which labour market would you expect to have the higher level of employment? Explain. c) Now, assume that the government implements a minimum wage in both labour markets. Specifically, the minimum wage is set equal to the perfectly competitive labour market's equilibrium wage. i) Do you expect the new minimum wage to increase/decrease/not affect the wage level in the monopsonistic labour market? Do you expect the new minimum wage to increase/decrease/not affect the employment level in the monopsonistic labour market? Explain. ii) Do you expect the new minimum wage to increase/decrease/not affect the wage level in the perfectly competitive labour market? Do you expect the new minimum wage to increase/decrease/not affect the employment level in the perfectly competitive labour…arrow_forwardWhat is the marginal cost of labor? What is a perfectly competitive labor marketarrow_forwardThe table shows levels of employment (Labor), the marginal product of each of those levels, and a monopoly's marginal revenue. What is the monopoly's marginal revenue product at each level of employment? If the monopoly operates in a perfectly competitive labor market where the going market wage is $20, what is the firm's profit maximizing level of employment?arrow_forward
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