Consider the labor market in an imaginary coastal town called Nutsland. There is only one buyer in that market, namely Nutsland Farm that operates with a production function of Q= L – 40 L2 - The supply of labor is given as L=w-2, where w is the wage. On the output side, Olive Farm takes the price P =20 TL/kg for its olive oil as given due to intense competition in that market. a. Find Olive Farm's profit-maximizing labor demand. What wage does it have to pay? b. What would be the wage in Nutsland if the market were competitive? c. Compare the welfare implications of a) versus b). Calculate the deadweight loss and show it on a graph.

Consider the labor market in an imaginary coastal town called Nutsland. There is only one buyer in that market, namely Nutsland Farm that operates with a production function of Q= L – 40 L2 - The supply of labor is given as L=w-2, where w is the wage. On the output side, Olive Farm takes the price P =20 TL/kg for its olive oil as given due to intense competition in that market. a. Find Olive Farm's profit-maximizing labor demand. What wage does it have to pay? b. What would be the wage in Nutsland if the market were competitive? c. Compare the welfare implications of a) versus b). Calculate the deadweight loss and show it on a graph.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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