Assume a firms is operating in a perfectly competitive product market with an equilibrium price of P = Rp5 . The following production information (see first two columns below) is given for a firm where the amount of capital is assumed fixed. L Q W 0 0 -- 1 10 Rp20 2 19 Rp25 3 27 Rp30 4 34 Rp35 5 40 RP40 6 45 Rp45 7 49 Rp50 a. If the labor demand is perfectly competitive with an equilibrium wage of W=Rp34 , how many workers will be hired? Why? b. Suppose a union organizes the workers and successfully negotiates a wage rate of W=Rp.44. What happens to employment and output? c. Suppose the union is able to set both the wage rate and employment, say, at W=Rp.34 and L=6, respectively. Is the firm still making profit?
Assume a firms is operating in a perfectly competitive product market with an equilibrium price of P = Rp5 . The following production information (see first two columns below) is given for a firm where the amount of capital is assumed fixed. L Q W 0 0 -- 1 10 Rp20 2 19 Rp25 3 27 Rp30 4 34 Rp35 5 40 RP40 6 45 Rp45 7 49 Rp50 a. If the labor demand is perfectly competitive with an equilibrium wage of W=Rp34 , how many workers will be hired? Why? b. Suppose a union organizes the workers and successfully negotiates a wage rate of W=Rp.44. What happens to employment and output? c. Suppose the union is able to set both the wage rate and employment, say, at W=Rp.34 and L=6, respectively. Is the firm still making profit?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Assume a firms is operating in a
| L | Q | W |
| 0 | 0 | -- |
| 1 | 10 | Rp20 |
| 2 | 19 | Rp25 |
| 3 | 27 | Rp30 |
| 4 | 34 | Rp35 |
| 5 | 40 | RP40 |
| 6 | 45 | Rp45 |
| 7 | 49 | Rp50 |
a. If the labor demand is perfectly competitive with an equilibrium wage of W=Rp34 , how many workers will be hired? Why?
b. Suppose a union organizes the workers and successfully negotiates a wage rate of W=Rp.44. What happens to employment and output?
c. Suppose the union is able to set both the wage rate and employment, say, at W=Rp.34 and L=6, respectively. Is the firm still making profit?
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