Q) State whether the following statements are true or false. Shortly explain your answer in 1-2...

Q) State whether the following statements are true or false. Shortly explain your answer in 1-2 sentences.

a) The life cycle model of labor supply predicts that wage increases along the expected wage-age profile can lead to decreases in an individual’s hours worked.

b) In a model with a perfectly competitive firm, the two profit maximizingconditions VMP_E = w and MC=p are equivalent in the short run.

c) Labor Demand is more elastic in the long run than in the short run.

d) In a monopsony with a non-discriminating monopsonist the labor supply curve equals the marginal cost of labor

Solutions

Expert Solution

a. True.

During the younger years there will be a negative relationship between the number of hours worked and the wages and over the years the relationship tends to be positive.

b. True

The additional money generated by employing one more unit of labour is known as the value of marginal productivity of labour. It is obtained by multiplying the price of the output by marginal productivity of labour. The profit is maximised at a point where the value of marginal productivity of labour is equal to the wage rate.

Now according to the marginal cost condition, the output will be produced till marginal cost is equal to the price of the output

c. True

It is more elastic due to the changes in the composition of capital and labour used, changes in the pattern of production and the changes in the demand for output in the long run.

d. False

The supply of labour in a monopsony with a non discriminating monoponist will be equal to the average cost of labour.

Rahul Sunny answered 1 month ago

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