Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Question
Chapter 14, Problem 1RQ
To determine
Elasticity of labor
Expert Solution & Answer
Explanation of Solution
The demand curve for labor is the marginal revenue product of labor which is measured by marginal product of labor multiplied by the marginal revenue.
In a competitive industry, since the price equals marginal revenue which is perfectly
The marginal revenue in a monopolist is downward sloping due to the law of diminishing returns. This implies as more labor is hired and output is produced, lower will be the price charged. As a result, the marginal revenue product of labor slopes downward and falls more quickly for the monopolist. Hence, the demand curve for labor (marginal revenue product curve) is steeper and more inelastic for a monopolist than for the competitive firm.
Economics Concept Introduction
Monopolist demand curve: The demand curve of the monopolist is a downward sloping market demand curve, so the price that the monopolist can get for each additional unit of output that must fall as the monopolist increases its output.
Marginal revenue curve: Marginal revenue curve shows the additional revenue that will be generated by increasing the product sales by one unit.
Marginal revenue product of labor: Marginal revenue product of labor is the change in firm’s revenue as a result of employing an extra unit of labor.
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Students have asked these similar questions
You are a labor economist trying to evaluate whether the labor market for computer scientists is competitive or monopsonistic. Based on previous research, you know that the production function for computers depends only on labor input: Y = -0.5L^2 + 10L; where Y is the output of computers and L is the quantity of labor used. The price of a computer is p = 2. You also know that the labor supply, as a function of the wage, for computer scientists is the following, where w is the wage per unit of labor: L = -10 + w.
a. Find the equilibrium wages and employment (wc; Lc) that would prevail if the market for computer scientists were competitive. [Remember that a competitive firm takes the wage as given : that is, it assumes that the quantity of workers that it hires has no effect on the price of the next worker. (Of course, the equilibrium wage must equate demand and supply)].
Consider the labour markets for skilled labour and unskilled labour.
The labour demand curve for skilled workers is given by w = e(150 - 5L)/100. The labour demand curve for unskilled workers is w = 50 - 2L. The labour supply for each of the two labour markets is given by L = 20.
The effort of firm's skilled workers depends on their wage according to the following schedule:
wage (w)
20
25
30
35
40
45
Effort (e)
16
24
30
34
36
36
a) Calculate the equilibrium employment, unemployment, and wage for unskilled workers.
b) Calculate the profit-maximizing contract (w,e).
c) Calculate the equilibrium employment, unemployment, and wage for skilled workers.
d) In a single labeled graph in (w - L), illustrate the labour market equilibria for skilled and unskilled workers.
e) Calculate the cumulative income distribution for each labour market by reporting the cumulative shares for the following percentiles: 50% and 100%.
f) In a single graph, construct the Lorenz curve representing labour…
The more elastic the labour supply is, the smaller the wage paid by a monopsonist. True or False?
Chapter 14 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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