a) According to Adam Smith's Model, the prices of goods depend on the relative value of labour used to produce the goods. Therefore, if it takes 7 hours to produce 35 shirts, and 9 heeirs to produce D socks, then I shirt should trade for how many socks? b) Suppose Caitlan has preferences for Watermelons (W) and Bananas (B) given by: Utility-V3.85 W B Caitlan wishes to generate X utils from the consumption of watermelons and bananas. Let X - A+2C+30. Suppose she can only buy bananas in sets of 5, 10, 15 or 22 units. How many units of watermelons should she consume in each case to ensure that she does not change her desired utility level? c) Suppose that the supply curve for the labour to a firm is given by L-X*w and the marginal expense of labour curve is given by MEL - L (X/2) where w is the market wage. Suppose also that the firm's demand for labour (marginal revenue product) curve is given by L-Y-X*MRPL Let X-D and let Y- 500 + B. i) If the firm acts as a monopsonist, how many workers will it hire in order to marimire profits? ii) What wage will it pay?

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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a) According to Adam Smith's Model, the prices of goods depend on the relative value of labour
used to produce the goods. Therefore, if it takes 7 hours to produce 35 shirts, and 9 heeirs to
produce D socks, then I shirt should trade for how many socks?
b) Suppose Caitlan has preferences for Watermelons (W) and Bananas (B) given by:
Utility V3.85 W B
Caitlan wishes to generate X utils from the consumption of watermelons and bananas.
Let X A+2C+30. Suppose she can only buy bananas in sets of 5, 10, 15 or 22 units. How many
units of watermelons should she consume in each case to ensure that she does not change her
desired utility level?
c) Suppose that the supply curve for the labour to a firm is given by
L=X*w
and the marginal expense of labour curve is given by
MEL = L/ (X/2)
where w is the market wage. Suppose also that the firm's demand for labour (marginal revenue
product) curve is given by
L-Y-X*MRPL
Let X-D and let Y 500 + B.
i) If the firm acts as a monopsonist, how many workers will it hire in order to mazimize
profits?
ii) What wage will it pay?
Transcribed Image Text:a) According to Adam Smith's Model, the prices of goods depend on the relative value of labour used to produce the goods. Therefore, if it takes 7 hours to produce 35 shirts, and 9 heeirs to produce D socks, then I shirt should trade for how many socks? b) Suppose Caitlan has preferences for Watermelons (W) and Bananas (B) given by: Utility V3.85 W B Caitlan wishes to generate X utils from the consumption of watermelons and bananas. Let X A+2C+30. Suppose she can only buy bananas in sets of 5, 10, 15 or 22 units. How many units of watermelons should she consume in each case to ensure that she does not change her desired utility level? c) Suppose that the supply curve for the labour to a firm is given by L=X*w and the marginal expense of labour curve is given by MEL = L/ (X/2) where w is the market wage. Suppose also that the firm's demand for labour (marginal revenue product) curve is given by L-Y-X*MRPL Let X-D and let Y 500 + B. i) If the firm acts as a monopsonist, how many workers will it hire in order to mazimize profits? ii) What wage will it pay?
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