3. LABOR DEMAND, PART II A. What exactly is the interpretation of the term w/MPL?...

3. LABOR DEMAND, PART II

A. What exactly is the interpretation of the term w/MPL? Explain. (5 points)

B. What exactly is the interpretation of the term r/MPK? Explain (5 points)

C. In choosing its optimal combination of labor and capital, explain why a company must satisfy the condition w/MPL = r/MPK. (5 points)

D. Suppose “progress” makes capital less expensive. Is it necessarily the case that a profit-seeking company will now use more capital? Demonstrate and explain. (5 points)

E. Given your analysis in Part D above, is it necessarily the case that this profit-seeking company will now use less labor? Demonstrate and explain. (5 points)

F. Now explain why the following statement is true/false/uncertain. “If capital and labor are substitutes in production, then capital and labor must be gross substitutes.”

(5 points)

Solutions

Expert Solution

Solution to first 4 sub parts provided ...

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Labor demand: Ld = 210 – 2W Labor supply: Ls = 120 + W W =...

Labor demand: Ld = 210 – 2W Labor supply: Ls = 120 + W W = the wage rate. If the government sets the minimum wage rate at $40 per hour, Ld or employment will decline by ___ (compare with equilibrium employment). Select one: A. 5 B. 10 C. 15 D. 20 E. 25

3. Suppose the demand for labor is given by LD = 12 – 1/5 W (or...

3. Suppose the demand for labor is given by LD = 12 – 1/5 W (or W = 60 – 5L), and the domestic supply of labor is given by LS = W – 6 (or W = L + 6) a) Calculate the market-clearing quantity of labor and the wage and graph (and label) everything: L* = ____________ W* = ___________ b) Suppose that newly arriving immigrants have LS = 2W – 12 and are as productive as domestic...

Inverse Labor Supply is w=5L. The Inverse Labor Demand curve is w=100-20L Suppose there is a...

Inverse Labor Supply is w=5L. The Inverse Labor Demand curve is w=100-20L Suppose there is a negative production externality that costs society $50 per unit of labor hired. 1. what is the social marginal benefit curve now, and why is it not the same as labor demand curve? 2. what is the socially optimal level of employment 3. what is the dead-weight loss associated w/ CME? 4. what is the dead-weight loss associated w/ the monopsony? 5. is the monopsony...

Labor Supply in an industry is given by ES = 10 + w and labor demand...

Labor Supply in an industry is given by ES = 10 + w and labor demand is given by ED = 40 − 4w, where E is the level of employment and w is hourly wage rate. 1) Draw the supply and demand curves and find the competitive equilibrium wage and employment level. 2) What is the unemployment rate at this equilibrium? 3) Calculate the producer and worker surplus 4) Suppose that the government imposes a minimum wage of $8...

Question 3: What are the determinants of demand for labor and supply of labor? How the...

Question 3: What are the determinants of demand for labor and supply of labor? How the equilibrium wage rate is determined in labor market? Why a janitor gets lower wage than a heart surgeon? Explain

The demand curve for labor facing a monopsonist is given as W=35-6L. The labor supply curve...

The demand curve for labor facing a monopsonist is given as W=35-6L. The labor supply curve is W=3+L, where W represents the hourly wage and L the number of person hours hired. a) Write out the formula for the monopsonist's marginal labor cost curve? b) What is the optimal quantity of labor hired by the monopsonist? c) Determine the optimal wage paid by the monopsonist.

5. Suppose we have the following information about the market for labor: Demand for labor: w...

5. Suppose we have the following information about the market for labor: Demand for labor: w = 9 - 3L Supply of labor: w = 3 + 5L L = hundreds of thousands of hours per week w = real wage in dollars per hour, base year dollars. Find the equilibrium wage and quantity of labor employed. After a wage increase of 25%, how many people are unemployed?

1. Consider the labor supply and labor demand functions below, where w is the hourly wage...

1. Consider the labor supply and labor demand functions below, where w is the hourly wage and h is the hours worked per day. Labor supply: w=5+2.5´h Labor demand: w=26-0.5´h Compute the daily profit of the firm assuming that other factors of production are all costless. Show all the steps. Also, draw the labor supply and labor demand lines, and identify the economic profit area. (15 points) What if labor demand is less elastic; e.g., labor demand: w=26-h? Would daily...

The demand for labor in a domestic industry is D = 36 – 2W, where W...

The demand for labor in a domestic industry is D = 36 – 2W, where W = the wage rate and D = the number (in thousands) of employees whom the firms would be interested in hiring at particular wage rates. Sdomestic = 9 + W, where Sdomestic = the number (in thousands) of native workers who are interested in working in the industry at particular wages. Stotal = 10 + 2W, where Stotal is the total number (including immigrants)...

3. The market demand for labour is given by w = 18 – 0.05L, where w...

3. The market demand for labour is given by w = 18 – 0.05L, where w is the wage rate ($/hr) and L is the number of workers the firm want to employ. The market supply of labour is given by w = 10 + 0.15L, where w is the wage rate ($/hr) and L is the number of workers who want to work. The government introduces the payroll tax $1 per hr per worker. a. What is the portion...

Subjects