LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Chapter 4, Problem 1RQ
To determine
Expert Solution & Answer
Explanation of Solution
Producer surplus in a labor market is an advantage taken by the producer due to the variations in the value of marginal product of the labor and the value of total product. Producer surplus is represented by the area above the competitive wage and below the
Figure 1 shows equilibrium in a competitive labor market. In this figure, employment is measured on the horizontal axis and the wage rate in dollars is measured on the vertical axis. The triangle P, which is above the wage rate and under the demand curve, gives the producer surplus and the triangle Q, which is above the supply curve and under the wage rate gives the worker surplus.
Economics Concept Introduction
Producer surplus: Producer surplus in a labor market is an advantage taken by the producer due to the variations in the value of marginal product of the labor and the value of total product.
Worker surplus: Worker surplus refers to the difference between the competitive wage that is earned by the worker and the opportunity cost of workers’ time.
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