Microeconomics Theory and Applications
Quiz 16: Employment and Pricing of Inputs
Explain the Shapes of the Supply Curve of Labor for All
Explain the shapes of the supply curve of labor for all industries together and the labor supply curve for a particular industry.
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A monopoly firm faces the output demand curve P = 25 - 0.5Q,where P is the price of the final product and Q is the level of output.The production function is given by Q = 5X,where X is the only input used in production.Each unit of X is bought by the firm at a constant price of $25 per unit.Based on this information,what level of input would the profit-maximizing monopoly employ?
Assume that a car manufacturing plant in a small town in Michigan in the U.S.is a monopsonist employer of heavy machinery operators.The marginal value product of labor is given by w = 1100 - 20Q where w is the wage rate and Q is the number of heavy machinery operators.The supply of heavy machinery operators is given by w = 200 + 5Q.What is the profit-maximizing level of employment and wage for the car manufacturer? Assume that the plant is perfectly competitive in the output market.
Define monopsony in an input market and graphically illustrate equilibrium employment and wages under a monopsony.
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