Answer to Question #83605 in Economics of Enterprise for Shaendra

Question

Suppose the information about labors. The product price is $10 per unit and wage rate is $60 per labor unit.

Units of labor 0 1 2 3 4 5 6 7
Total Product 0 17 31 43 53 60 65 68

a. Derive the schedules for labor demand and real labor demand from the information above. Graphically show both. b. Show graphically the labour supply and marginal factor (labour) cost curves for this firm. Are the curves the same or different? If they are different, which one is higher? c. Plot the labour demand data on the graph derived in (b). What are the equilibrium wage rate and level of employment?

Answer 1

a. The labor demand curve is a horizontal line at wage rate of $60 per unit.

b. The labour supply curve is an upward-sloping curve and marginal factor (labour) cost curve is the same as labour demand curve.

c. The equilibrium wage rate is $60 per unit and level of employment is 7 units of labour.