Question: Following is a table showing the short run production function f

Following is a table showing the short-run production function for a competitive firm whose output sells for $2 per unit.
L Q
0......0
1....14
2....26
3....36
4....44
5....50
6....54
7....56
8....56

a. (8) Using these data, calculate and graph the demand curve for labor of this firm.


b. Suppose that the equilibrium wage rate for workers the firm employs is $8. How many workers will the firm employ? Show demand and supply to the firm and the equilibrium number of workers on a graph.
c. Now consider a firm with the same production function, with output price=$2 when 14 units of output are produced, but operating under conditions of imperfect competition in the product market. Explain how and why this firm’s demand curve for labor will compare to that of the firm operating in a competitive product market (described in parts a and b), and the consequences for the firm’s employment of labor. You do not need to draw a graph or do any calculationshere.
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  • CreatedJuly 29, 2013
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