3. Union and Labor Market Efficiency (a) Given an inverse labor demand function of w = 30 - 0.02LD, find the elasticity of labor demand when w = 10. Does the firm pay out more to its workers by increasing wages?
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- What determines the demand for labor for a firm operation in a perfectly competitive out market?What determines the demand for labor for a firm with market power in the output market?Explain the relationship between the own-wage elasticity of labor demand and output demand elasticity. labour costs as a share of total costs of production.
- A firm’s technology requires it to combine 5 person-hours of labor with 3 machinehours to produce 1 unit of output. The firm has 15 machines in place and the wage rate rises from $10 per hour to $20 per hour. What is the firm’s short-run elasticity of labor demand?Suppose a firm purchases labor in a competitive labor market and sells its product in a competitive product market. The firm’s elasticity of demand for labor is -0.4. Suppose the wage increases by 5 percent. What will happen to the number of workers hired by the firm? What will happen to the marginal productivity of the last worker hired by the firm?A firm faces a perfectly elastic demand for its output at a price of $6 per unit of output. The firm, however, faces an upward-sloped labor supply curve ofE = 20w - 120where E is the number of workers hired each hour and w is the hourly wage rate. Thus, the firm faces an upward-sloped marginal cost of labor curve ofMCE = 6 + 0.1EEach hour of labor produces five units of output. How many workers should the firm hire each hour to maximize profits? What wage will the firm pay? What are the firm’s hourly profits?
- 1. Why is a firm's demand for labor considered a 'derived demand?' What is it derived from? 2. The marginal cost of labor (MCL) is equal to what for a firm that operates in a competitive labor market? How does this compare with the MCL for a monopsony.At a wage of $26 per hour, the firm employs 55,000 of hours of labor per week. If the wage would increase to $30 per hour, the firm would employ 45,000 hours of labor per week. What is the elasticity of labor demand? a. -1.4 b. -0.7 c. -1.18 d. -0.8Suppose a firm purchases labor in a competitive labor market and sells it product in a competitive product market. The firm's elasticity of demand for labor is -2.50. Suppose the wage increases by 4%. By what percentage will the quantity of labor hired by the firm change? Show your work.
- Answer the following questions based on the below diagram that shows the labour demand curve for a firm, where X is the mid-point of the line MN. Wage (RM) M 12 Quantity of labour 3 6. a. Calculate the elasticity of labour demand between the wage of RM2 and RM4. b. Calculate the elasticity of labour demand between the wage of RM8 and RM10. 6.3. A monopsonist's inverse demand for labor can be written as D-'(w) = VMP(E) = 40 – 0.005ED. Labor is supplied to the firm according to the inverse supply function S-(w) s(E) = w = 5+ 0.01E3. %3Dwrite down the optimization problem for a representative firm and show the profit-maximizing point graphically and discuss about it. b) Derive the rule of labor hiring for a firm that operates in the short-run.