1. In an imperfect market, if a firm has market power how do they choose the...

1. In an imperfect market, if a firm has market power how do they choose the amount of workers hired?

A. The base the amount on where the market wage equals the firm’s revenue product.

B. The base the amount on where the market wage equals the firm’s marginal cost product.

C. The base the amount on where the market wage equals the firm’s marginal revenue product.

2. Employment will be lower in a(n) ________ competitive industry than in a ________ competitive industry.

A. perfectly; imperfectly

B. imperfectly; normative

C. imperfectly; perfectly

Solutions

Expert Solution

Option C. the optimum number of labour units hired is determined by the intersection of marginal revenue product and the market wage. Marginal revenue product is the demand function for labour and for a given market which this will determine how much labour units are required

Option C is correct. Perfectly competitive market hires a greater number of workers because its labour supply function lie below the marginal cost of labour function of imperfect market. Due to this reason wages as well as the level of employment both are higher.

Rahul Sunny answered 2 years ago

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