Workers come in many different types, or productivities. The productivity of a worker is given by where is distributed uniformly on the interval 0 ≤ 0 ≤ 2. When a firm hires a worker with productivity, the firm can produce units of output and earn po in revenue, where p < 2. Each worker can choose to work for the company, or can seek employment elsewhere that gives the worker a wage 0³ (a) If the firm pays a wage w, which types of workers want to work for the firm? (b) What is the average output of the workers hired by the firm and what is the average output of those who don't work for it? (c) If the firm is a monopsony purchaser of labour, what wage would it set to maximise its profits. What is the employment level?

Workers come in many different types, or productivities. The productivity of a worker is given by where is distributed uniformly on the interval 0 ≤ 0 ≤ 2. When a firm hires a worker with productivity, the firm can produce units of output and earn po in revenue, where p < 2. Each worker can choose to work for the company, or can seek employment elsewhere that gives the worker a wage 0³ (a) If the firm pays a wage w, which types of workers want to work for the firm? (b) What is the average output of the workers hired by the firm and what is the average output of those who don't work for it? (c) If the firm is a monopsony purchaser of labour, what wage would it set to maximise its profits. What is the employment level?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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