You are a labor economist trying to evaluate whether the labor market for computer scientists is competitive or monopsonistic. Based on previous research, you know that the production function for computers depends only on labor input: Y = -0.5L^2 + 10L; where Y is the output of computers and L is the quantity of labor used. The price of a computer is p = 2. You also know that the labor supply, as a function of the wage, for computer scientists is the following, where w is the wage per unit of labor: L = -10 + w. a. Find the equilibrium wages and employment (wc; Lc) that would prevail if the market for computer scientists were competitive. [Remember that a competitive firm takes the wage as given : that is, it assumes that the quantity of workers that it hires has no effect on the price of the next worker. (Of course, the equilibrium wage must equate demand and supply)].
You are a labor economist trying to evaluate whether the labor market for computer scientists is competitive or monopsonistic. Based on previous research, you know that the production function for computers depends only on labor input: Y = -0.5L^2 + 10L; where Y is the output of computers and L is the quantity of labor used. The price of a computer is p = 2. You also know that the labor supply, as a function of the wage, for computer scientists is the following, where w is the wage per unit of labor: L = -10 + w.
a. Find the equilibrium wages and employment (wc; Lc) that would prevail if the market for computer scientists were competitive. [Remember that a competitive firm takes the wage as given : that is, it assumes that the quantity of workers that it hires has no effect on the price of the next worker. (Of course, the equilibrium wage must equate demand and supply)].
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