Andy has a monopoly in the sale of engineering services in the local market and employs...

Andy has a monopoly in the sale of engineering services in the local market and employs only highly skilled labour. Suppose the supply of labour to Andy’s firm is given by L=100w, demand for labor is given by L = 1000–100MRPL and MC of labour is given by MCL =L/50, where L is the labour demanded and supplied and w is the wage rate per hour.

a)If Andy has monopoly power in the market, how many workers will he hire in order to maximize profit? What will the wage be?

b)Suppose Andy hires workers from a competitive market, but still acts as a monopolist when selling services. How many workers will the firm hire, and what will the wage be?

c)Suppose the above firm has the following information: MPL = 12.4 – 0.08L and output price = $400. Based on the new information, determine the equation that represents the MRPL curve. How many employees will be hired if the daily wage rate is $320?

Expert Solution

Rahul Sunny answered 2 years ago

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