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Author Question: Suppose that a mining company employs 80 of the available laborers in a town. Explain what will ... (Read 90 times)

mikaylakyoung

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on: Jul 1, 2018
Suppose that a mining company employs 80 of the available laborers in a town. Explain what will happen to the number of laborers hired and the wage rate paid by the mine if a minimum wage is set at the competitive level.
 
  What will be an ideal response?

Question 2

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?
Microeconomics ¦ Perloff ¦ 8th Edition
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izzat

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Reply #1 on: Jul 1, 2018
Answer to Question 1

The mine was operating as a monopsony. The competitive minimum wage will result in the mine hiring a competitive level of laborers at the higher competitive wage.

Answer to Question 2

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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