Suppose a monopoly producer is also a monopsonist in the labor market. Demand for the output is p = 100 - Q. The production function is Q = L, and the labor supply curve is w = 10 + L. How much labor does the firm hire? What wage is paid?
What will be an ideal response?
The firm's marginal revenue product of labor is MRP = 100 - 2L. Marginal expenditure is 10 + 2L. Setting them equal yields 10 + 2L = 100 - 2L or L = 90/4 = 22.5 units of labor, for which the firm will pay a wage of (10 + L) = 32.5.
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If marginal net utility is positive, the consumer must be buying too small a quantity to maximize total net utility. Why?
What will be an ideal response?
The elasticity of supply measures the sensitivity of
A) supply to changes in costs. B) quantity supplied to quantity demanded. C) quantity supplied to a change in price. D) price to changes in supply.
When negative externalities are involved, the market is said to
A. fail, because it underproduces the good connected with the negative externality. B. fail, because it overproduces the good connected with the negative externality. C. succeed, because it produces the socially optimal quantity of the good connected with the negative externality. D. be "in optimum," because the equilibrium fully adjusts for the negative externality.
For each of the following cost functions, if possible, find minimum AC and minimum AVC
a. TC = 40,000 + 20 Q b. TC = 1000 + 2Q + 0.1 Q2