In: Economics
For a company under complete competition, the following production function applies
Q = F (K, L) = KL
where Q is the size of production, K is the size of the capital contribution and L the amount of labor.
a) What is the marginal product for labor, MP L ?
b) Assume that the price of the finished product is SEK 15. What is the value of the marginal product
for Labor , MRP L ?
c) Suppose another company in a fully competitive market has MRP L = 450 - 0.5 L.
If the salary in the market is SEK 0, how many units of labor should it
profit maximizing company hire?
d) Assume that the market consists of 4 companies that are all identical to the company in question c)
and that the conditions are also otherwise ic).
( i) Specify the function for labor market demand.
ii) How many units of labor are in demand in the market ?