Wage determination under perfect competition . Concept Introduction: Marginal revenue product: The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labour.

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Answer 1

Question

Chapter 28, Problem 28.1LO

To determine

Wage determination under perfect competition.

Concept Introduction:

Marginal revenue product: The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labour.

Expert Solution & Answer

Explanation of Solution

Wage will be determined by the demand and supply of labour. Under perfect competition, the number of labour the firm will employ at which the wage rate will be exactly same as the marginal revenue product (MRP) of the labour.

The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labor. It is the value of the product of marginal product of labor and the marginal revenue of the product. The point where MRP is equal to the wage rate will determine the amount of labour to be hired by the firm with the objective of profit maximization.

The marginal revenue product of labor is downward sloping

As more and more labor is employed, the marginal productivity starts declining as per the law of diminishing returns. This leads to fall in the marginal revenue product as well. This MRP curve also depicts the demand curve for labor.

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Exercise 6 Imagine that you head production of a multinational food processing company. The ongoing uncer- tainty about costs means that you are unsure of the future cost of one of your inputs, x2. Your firm's production function is y = f(x1, x2) = x²x²² The output price p is 1000, x1 = 27, and wx₁ = 60. 1. Suppose the current input price is Wx2 = 50. Solve for the optimal choice of x2. 2. Now suppose that the probability the input price remains 50 is 0.65 and the probability that Wx2 60 is 0.35. Solve for the optimal choice of x2. Round down to the nearest integer. = 3. Finally, suppose the costs do actually rise, i.e., Wx2 = 60. Calculate the difference in profit from the uncertainty in (2) vs. the certainty in (1).

Answer 2

Question

Chapter 28, Problem 28.1LO

To determine

Wage determination under perfect competition.

Concept Introduction:

Marginal revenue product: The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labour.

Expert Solution & Answer

Explanation of Solution

Wage will be determined by the demand and supply of labour. Under perfect competition, the number of labour the firm will employ at which the wage rate will be exactly same as the marginal revenue product (MRP) of the labour.

The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labor. It is the value of the product of marginal product of labor and the marginal revenue of the product. The point where MRP is equal to the wage rate will determine the amount of labour to be hired by the firm with the objective of profit maximization.

The marginal revenue product of labor is downward sloping

As more and more labor is employed, the marginal productivity starts declining as per the law of diminishing returns. This leads to fall in the marginal revenue product as well. This MRP curve also depicts the demand curve for labor.

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Answer 3

Question

Chapter 28, Problem 28.1LO

To determine

Wage determination under perfect competition.

Concept Introduction:

Marginal revenue product: The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labour.

Expert Solution & Answer

Explanation of Solution

Wage will be determined by the demand and supply of labour. Under perfect competition, the number of labour the firm will employ at which the wage rate will be exactly same as the marginal revenue product (MRP) of the labour.

The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labor. It is the value of the product of marginal product of labor and the marginal revenue of the product. The point where MRP is equal to the wage rate will determine the amount of labour to be hired by the firm with the objective of profit maximization.

The marginal revenue product of labor is downward sloping

As more and more labor is employed, the marginal productivity starts declining as per the law of diminishing returns. This leads to fall in the marginal revenue product as well. This MRP curve also depicts the demand curve for labor.

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Answer 4

Question

Chapter 28, Problem 28.1LO

To determine

Wage determination under perfect competition.

Concept Introduction:

Marginal revenue product: The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labour.

Expert Solution & Answer

Explanation of Solution

Wage will be determined by the demand and supply of labour. Under perfect competition, the number of labour the firm will employ at which the wage rate will be exactly same as the marginal revenue product (MRP) of the labour.

The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labor. It is the value of the product of marginal product of labor and the marginal revenue of the product. The point where MRP is equal to the wage rate will determine the amount of labour to be hired by the firm with the objective of profit maximization.

The marginal revenue product of labor is downward sloping

As more and more labor is employed, the marginal productivity starts declining as per the law of diminishing returns. This leads to fall in the marginal revenue product as well. This MRP curve also depicts the demand curve for labor.

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Answer 5

Chapter 28, Problem 28.1LO

To determine

Wage determination under perfect competition.

Concept Introduction:

Marginal revenue product: The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labour.

Expert Solution & Answer

Explanation of Solution

Wage will be determined by the demand and supply of labour. Under perfect competition, the number of labour the firm will employ at which the wage rate will be exactly same as the marginal revenue product (MRP) of the labour.

The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labor. It is the value of the product of marginal product of labor and the marginal revenue of the product. The point where MRP is equal to the wage rate will determine the amount of labour to be hired by the firm with the objective of profit maximization.

The marginal revenue product of labor is downward sloping

As more and more labor is employed, the marginal productivity starts declining as per the law of diminishing returns. This leads to fall in the marginal revenue product as well. This MRP curve also depicts the demand curve for labor.

Answer 6

Chapter 28, Problem 28.1LO

To determine

Wage determination under perfect competition.

Concept Introduction:

Marginal revenue product: The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labour.

Expert Solution & Answer

Explanation of Solution

Wage will be determined by the demand and supply of labour. Under perfect competition, the number of labour the firm will employ at which the wage rate will be exactly same as the marginal revenue product (MRP) of the labour.

The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labor. It is the value of the product of marginal product of labor and the marginal revenue of the product. The point where MRP is equal to the wage rate will determine the amount of labour to be hired by the firm with the objective of profit maximization.

The marginal revenue product of labor is downward sloping

As more and more labor is employed, the marginal productivity starts declining as per the law of diminishing returns. This leads to fall in the marginal revenue product as well. This MRP curve also depicts the demand curve for labor.

Answer 7

Chapter 28, Problem 28.1LO

To determine

Wage determination under perfect competition.

Concept Introduction:

Marginal revenue product: The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labour.

Answer 8

Expert Solution & Answer

Explanation of Solution

Wage will be determined by the demand and supply of labour. Under perfect competition, the number of labour the firm will employ at which the wage rate will be exactly same as the marginal revenue product (MRP) of the labour.

The marginal revenue product (MRP) of a labour is equal to the revenue generated from the marginal product of the labor. It is the value of the product of marginal product of labor and the marginal revenue of the product. The point where MRP is equal to the wage rate will determine the amount of labour to be hired by the firm with the objective of profit maximization.

The marginal revenue product of labor is downward sloping

As more and more labor is employed, the marginal productivity starts declining as per the law of diminishing returns. This leads to fall in the marginal revenue product as well. This MRP curve also depicts the demand curve for labor.