7. Monopsony and elasticity of labor supplyConsider the labor market for hairstylists in two small towns, each with only one hair salon, such that the owners of the salons have monopsony hiringpower for hairstylists. The following graphs depict the labor supply, marginal expense of labor (MEL), and labor demand in these markets.WAGE (Dollars per hour)302724211815126300Labor Supply☆Labor Demand+ +24Town 1+6++8 10 12LABOR (Hours)+14MEL+16+1820WAGE (Dollars per hour)30272421181512300+2+4+6Town 2MELLabor SupplyLabor Demand+8 10 12 14 16 18 20LABOR (Hours)? Complete the following table with the profit-maximizing quantity of labor each salon will hire, along with the wage it will pay for each hour of labor.LaborWageTown 1Town 2In Town 1, the salon pays a wage that iswage isthe marginal value product of the final unit of labor hired, whereas in Town 2, thethe marginal value product of the final unit of labor hired.The outcome inwith respect to changes in the wage.is farther from that of a competitive market, given that the supply of labor iselastic (at the market equilibrium)

Labor supply refers to the total quantity of labor that individuals are willing and able to provide…

7. Monopsony and elasticity of labor supply Consider the labor market for hairstylists in two small towns, each with only one hair salon, such that the owners of the salons have monopsony hiring power for hairstylists. The following graphs depict the labor supply, marginal expense of labor (MEL), and labor demand in these markets. WAGE (Dollars per hour) 30 27 24 21 18 15 12 3 0 024 Town 1 MEL Labor Supply Labor Demand 6 8 10 12 14 16 18 20 LABOR (Hours) ? WAGE (Dollars per hour) 30 27 24 21 18 15 12 3 0 024 Town 2 MEL Labor Supply Labor Demand 6 8 10 12 14 16 18 20 LABOR (Hours) (?)

7. Monopsony and elasticity of labor supply Consider the labor market for hairstylists in two small towns, each with only one hair salon, such that the owners of the salons have monopsony hiring power for hairstylists. The following graphs depict the labor supply, marginal expense of labor (MEL), and labor demand in these markets. WAGE (Dollars per hour) 30 27 24 21 18 15 12 3 0 024 Town 1 MEL Labor Supply Labor Demand 6 8 10 12 14 16 18 20 LABOR (Hours) ? WAGE (Dollars per hour) 30 27 24 21 18 15 12 3 0 024 Town 2 MEL Labor Supply Labor Demand 6 8 10 12 14 16 18 20 LABOR (Hours) (?)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. Minimum wage legislation The following graph gives the labor market for the fast-food industry of the imaginary city of Combopolis. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. WAGE (Dollars per hour) 20 18 Graph Input Tool Market for Labor in the Fast Food Industry Wage 6 (Dollars per hour) 16 Supply 14 Labor Demanded (Hundreds of workers) 630 Labor Supplied (Hundreds of workers) 0 12 10 2 2 0 10 0 ° Demand 90 180 270 360 450 540 630 720 810 900 LABOR (Hundreds of workers) In this market, the equilibrium wage is $ per hour, and the equilibrium quantity of labor is Suppose the mayor of Combopolis introduces a legal minimum wage of $6 per hour. This type of price control is called a hundred workers. For each of the wages listed in the following table, determine the…
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47. What will happen to employment if the government sets a minimum wage at $140? (a) Employment will decrease to 15. (b) Employment will increase to 25. (c) It will have no impact on employment (d) None of the above
Number of Workers 0 1 2 3 4 5 Output Select one: O a. $400. O b. $200. O c. $100. d. $500. 0 100 280 Marginal Product of Labor 80 60 20 Value of Marginal Product of Labor $1,000 $800 $400 Wage $500 $500 $500 $500 $500 Marginal Profit $500 $100 Refer to the table above. To maximize its profit, the firm will hire workers as long as the value of the marginal product of labour equals or exceeds
5. Consider the market for labor. When you draw a supply and demand curve, what group of people represent “supply”? Explain.
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6. Plotting the supply of labor In Providence, 120 people are willing to spend an hour working as pizza makers for an hourly wage of $20. For each additional $5 that the wage increases above $20, an additional 30 people are willing to spend an hour working. For hourly wages of $20, $25, $30, $35, and $40, plot the daily labor supply curve for pizza makers on the following graph. WAGE (Dollars per hour) 50 45 40 35 30 25 20 15 10 5 0 0 + 30 60 90 120 150 180 210 LABOR (Number of workers) 240 270 300 Supply What is one explanation for why this labor supply curve is upward sloping? The opportunity cost of leisure increases as wages increase. O Unemployment benefits are steadily declining. Wages have to increase to accommodate union pressure. O Firms are willing to hire fewer pizza makers at a higher wage.
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6. Monopsony basics Consider a newspaper in a small town that has monopsony power in hiring journalists. The following table shows the labor hours that will be supplied at each of the given hourly wages, as well as the total cost of labor at each quantity of labor. Suppose the newspaper's demand for labor as a function MVP of the marginal value product of labor (MVPL) is given by L= 5.5- 20 Compute the marginal expense (MEL) and marginal value product (MVPL) of adding an additional hour at each quantity and enter the values into the following table. Hourly Wage WAGE (Dollars per hour) 90 80 60 10 100 40 20 30 20 40 70 10 50 0 30 The following graph depicts the supply of labor in this market. Labor Supplied (Hours) Use the grey points (star symbol) to plot the marginal expense at the five quantities of labor given in the previous table. Then use the blue points (circle symbol) to plot the firm's demand for labor as a function of the MVPL- 0 1 1 2 2 3 3 4 5 Total Labor Cost (Dollars per…