Answer to Question #83607 in Economics of Enterprise for Shaendra

Question

11. Suppose the information about labors. The product price is $10 per unit.

Wage rate 30 60 90 120 150 180 210 240
Units of labor 0 1 2 3 4 5 6 7
Total Product 0 17 31 43 53 60 65 68

a. Draw the firm’s labour supply and marginal resource cost curves. Are the curves the same or different? If they are different, which one is higher? b. On the same graph, plot the labour demand data of derived from the table above. What are the equilibrium wage rate and level of employment? c. Compare these answers with those you found in problem 10. By how much does this firm reduce wages below the competitive wage? By how much does this firm reduce employment below the competitive level?

Answer 1

a. The firm’s labour supply curve and marginal resource cost curve are the same and MRC = S = w.

b. The labour demand curve is the same as marginal revenue product curve, MRP = MP*MR = MP*P. The equilibrium wage rate is $120 and level of employment is 3 units.

c. These answers are not the same as those you found in problem 10.