Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Question
Chapter 16, Problem 16.6P
To determine
To find:Number of workers to be hired and wage rate.
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Suppose that in a competitive output market, firms hire labor from a competitive labor market. The firm has a fixed number of machines and can produce the following quantities (Q) associated with the number of workers (L) in a given hour.
L: 0, 1, 2, 3, 4, 5
Q: 0, 14, 26, 36, 44, 50
The market price of the good this firm sells is $2.50. If the firm pays a wage of W=$19.00 per hour, then how many units of labor should this firm hire to maximize profit? Show your work.
a) 1 b) 2 c) 3 d) 4 e) 5
Suppose that in a competitive output market, firms hire labor from a competitive labor market (so that the profit maximization conditions for hiring labor are as we discussed in class). The firm has a fixed number of machines and can produce the following quantities (Q) associated with the number of workers (L) in a given time period.
L Q
0 0
1 12
2 20
3 26
4 30
5 32
The market price of the good this firm sells is $5. If the firm pays a wage of w = $19.90 per time period, then how many units of labor should this firm hire to maximize profit?
Group of answer choices
a) 1
b) 3
c) 4
d) 2
e) 5
Suppose Ramone's Drones maximizes profits by making local deliveries using small drones and centrally located pilots to control the drones remotely. In the markets for pilots and drones, neither side has any market power - that is, they are both competitive markets.
A) If drones cost Ramone $1000 each to hire, what is the marginal revenue product (MRPK) of drones?
B)If pilots can be hired at a cost of $300 per day, what is the marginal revenue product (MRPL) of the pilots?
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- Central Manufacturing Company is the only manufacturing facility in a small remote town, and Central Manufacturing Company is the only employer of machinists in the area. The graph below shows the market for machinists with the marginal factor (resource) cost curve, the labor supply curve, and the marginal revenue product curve. A) Identify the profit-maximizing number of machinists. Explain using the labeling on the graph. (B) Identify the profit-maximizing wage rate that Central Manufacturing Company will pay its machinists. Explain using the labeling on the graph. (C) If the marginal product of machinists increases, what will happen to the quantity of output produced by Central Manufacturing Company? Explain. use the following grapharrow_forwardSuppose that a firm is producing in the short run with output given by: Q = 67L - L2The firm hires labor at a wage of $20 per hour and sells the good in a competitive market at P = $25 per unit. Find the firm’s optimal use of labor.arrow_forwardQuestion Two A coal-mining company is the only employer in town, and faces this supply curve for labor: W = 48 + ( 72/2000 )L where w is the daily wage, in dollars, and L is the number of workers employed. The company faces this demand curve for coal: P = 60 − ( 9/ 4000 )Q where p is the price of coal, per ton, and Q is the number of tons sold per day. Coalminers produce 8 tons of coal each, per day, regardless of the number hired. The mining company maximizes profit. a) How many workers will be hired, and how much profit will be made? b) Suppose a union is formed, which sets a wage of $120 per day. At this wage, according to the supply curve given above, 2000 miners are willing to work, and the company is free to hire as many of these as it wants. How many will be hired, and how much profit will be made?arrow_forward
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