Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Question
Chapter 14, Problem 1RQ
To determine
Elasticity of labor
Expert Solution & Answer
Explanation of Solution
The demand curve for labor is the marginal revenue product of labor which is measured by marginal product of labor multiplied by the marginal revenue.
In a competitive industry, since the
The marginal revenue in a monopolist is downward sloping due to the law of diminishing returns. This implies as more labor is hired and output is produced, lower will be the price charged. As a result, the marginal revenue product of labor slopes downward and falls more quickly for the monopolist. Hence, the demand curve for labor (marginal revenue product curve) is steeper and more inelastic for a monopolist than for the competitive firm.
Economics Concept Introduction
Monopolist demand curve: The demand curve of the monopolist is a downward sloping market demand curve, so the price that the monopolist can get for each additional unit of output that must fall as the monopolist increases its output.
Marginal revenue curve: Marginal revenue curve shows the additional revenue that will be generated by increasing the product sales by one unit.
Marginal revenue product of labor: Marginal revenue product of labor is the change in firm’s revenue as a result of employing an extra unit of labor.
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Consider the simple discrete job search model that we studied in class. Only the
unemployed can receive one offer per period from F(w) that is a uniform distribution on
[0,2]. There is a constant probability of being laid off at the end of each period while
employed. Assume that she can get a new offer right away when laid off. We want to
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parameters are a discount factor ẞ and an unemployment benefit b.R and show that T is contraction on [0, ∞). Explicitly state
any additional assumptions that you may need.(Grading guide line: 5pt for the
exact form of T, 10pt for showing contraction, and 5pt for stating correct
assumptions.)<
(b) Discuss why (a) is useful to understand the reservation wage wд in this
economy.<
(c) We write WR = WR (b,ẞ,λ) to reveal its dependence on (b,ẞ,λ). Show that 0 ≤
aWR
дь
OWR
дл
≤1 and ≥0. What about ?
awR
ав
State any additional assumptions that you may need.<
(d) Briefly explain the…
Chapter 14 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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